"Paying too much for stocks and giving capital to subpar businesses are what I see as the 2 main investment risks longer term, not necessarily market volatility," says Kevin Walenta, portfolio manager of Fidelity® Mid Cap Value Fund (FSMVX).
Walenta says he's keenly aware of early-2020 market realities and how it's impacted the fund, adding that he's been carefully monitoring the situation on behalf of shareholders. That said, he's remained patient, reviewed fund holdings, and continued to hold the stocks his research suggests have potential to outperform longer term.
The only thing he's recently changed about his approach, he says, is his attention to balance sheets. Walenta realized some of the fund's worst-performing positions in 2019 were companies with good business models, but significant debt, including real estate services provider Realogy Holdings and software & services business DXC Technology. He thought each could improve its balance sheet over time, but debt hurt their performance for the year and he sold both stocks from the portfolio.
Companies he's emphasized in early 2020, he says, include commercial real estate services company CBRE Group (CBRE), materials company Reliance Steel & Aluminum (RS), and software & services company Amdocs (DOX).
All have declined along with the market, but he believes their strong balance sheets could help these companies weather the downturn and eventually emerge as stronger competitors in their respective industries. "The goal is to beat the market over time."
Learn more about this manager and his fund
As of this date, CBRE Group composed 4.36% of fund assets; Reliance Steel & Aluminum composed 7.32% of fund assets; and Amdocs composed 2.46% of fund assets.
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