Investing in Canada's comeback

The economic recovery north of the border resembles that in the US, but with a key difference.

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In many ways, the economic recovery in Canada looks similar to that in the US, with a return to growth and rebounding consumer spending. Unlike many parts of the US, though, Canada has been slower to lift restrictions and make COVID vaccines available. Nevertheless, Portfolio Manager Ryan Oldham is finding opportunities.

“I seek high-quality companies with dominant market positions and competitive moats that are a lot more off the beaten path than their well-known counterparts in the US,” says Oldham, who manages Fidelity® Canada Fund (FICDX).

Oldham focuses on finding good businesses at attractive valuations that offer essential products and services, face limited competition, and are led by a management team with a track record of execution.

As part of his strategy, Oldham attempts to invest in firms he thinks have potential for 10% to 15% annual total shareholder returns—capital appreciation plus dividends—and that trade at or below the market’s price-earnings multiple.

As of February 28, notable fund holdings included convenience-store operator Alimentation Couche-Tard (ANCUF) and retail chain Dollarama (DLMAF), each of which he says benefits from customers’ preferences for smaller, hyper-local stores, rather than larger, more-crowded supermarkets.

Similarly, the fund owned the convertible bonds of movie-theater operator Cineplex (CPXGF), the largest movie theater chain in Canada. It holds 75% of the theater market in Canada, and Oldham notes the company faces no significant competition in major cities, including Toronto.

“I know it could take a while longer, but I believe people will come back to the movies longer term,” he says. “I think some investors are confusing a structural problem for a cyclical one.”

In all fund positions, Oldham tries to leverage Fidelity’s global research capabilities to find long-term values he thinks have potential for stable returns.

“If I do this well, I’ll be able to find firms that are compounding their growth, which should accrue to the fund,” he says.

Fidelity® Canada Fund held securities mentioned in this article as of its most recent holdings disclosure. For specific fund information, including holdings, please click on the fund trading symbol above.

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