"My strategy for finding true bargains among stocks that have sold off has been to seek underappreciated names that have shown resiliency in the past and could emerge even stronger once the economy recovers," says Sam Chamovitz, portfolio manager of Fidelity® International Small Cap Fund (FISMX).
This has been easier said than done: Chamovitz says many growth stocks are indeed resilient, but also pricey and arguably overcrowded. Conversely, many value stocks are underappreciated, but don't have the longer-term appeal he's seeking.
Food distribution is one potentially promising area that checks a lot of boxes, according to Chamovitz. Within this group, Italy-based food distributor Marr (MARR) is a stock he purchased for the fund in March.
COVID-19 hit Italy especially hard early on in the crisis, Chamovitz says. Yet Marr has a history of consistent, moderate growth and high return on capital. In the past, its management team successfully adjusted the company's cost structure to adapt to changing circumstances.
Marr is by far the largest player in its niche, although it's in a fragmented market. Chamovitz believes the company has plenty of room to gain market share as restaurants and hotels in Italy open again.
Chamovitz adds that Germany-based online ticketing provider CTS Eventim (CEVMY) had been on his wish list for a while, and in March, the company's stock price finally fell to a level where he felt comfortable buying it.
Online ticketing is normally a very stable business, but COVID-19 caused many events to be postponed or canceled.
"I expect it could take more time, but this business could emerge stronger as things normalize, given its strong balance sheet and ability to invest," he says.
These stocks are but 2 examples of Chamovitz's strategy at work, and both were still held as of April 30, the fund's most recent holdings disclosure.
Fidelity® International Small Cap Fund held securities mentioned in this article on April 30, 2020. As of this date, Marr accounted for 0.33% of fund assets and CTS Eventim made up 0.48% of fund assets.
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