With tariff talks, cautious consumer spending, elevated inflation and geopolitical risk dominating headlines, Fidelity’s Sammy Simnegar believes a simple yet powerful concept – recurring revenue – may be the answer to navigating capital market uncertainty.
“When I wonder about where to turn as an investor, I think about subscription-based business models like a tollbooth, collecting a steady stream of revenue regardless of market conditions,” says Simnegar, who runs Fidelity® Magellan Fund (FMAGX). “These companies generally offer a unique combination of predictability, growth and resilience, making them what I consider a cornerstone of stable, long-term investing.”
Simnegar’s investment approach has been highly flexible since taking over the diversified domestic equity strategy in 2019, giving him the ability to choose both domestic and foreign issuers across all market capitalizations and styles. He favors high-quality growth stocks benefiting from long-term mega-trends, as well as what he refers to as the three “B’s” – brands, barriers to entry and a “best-in-class” management team.
The buzz surrounding tariffs in early April forced many CEOs into a holding pattern regarding major expenditures, Simnegar explains. Meanwhile, consumers, after an initial burst of spending aimed at nailing down purchases of cars, appliances and other goods before tariffs kicked in, now appear to be adopting a more cautious attitude toward such large outlays, he adds.
“Subscription-based businesses are built on a foundation of recurring revenue, which I believe provides unparalleled visibility into future cash flow,” contends Simnegar. “Whether it’s streaming services, software solutions or e-commerce platforms, the products and services offered by these firms tend to have a high renewal rate and loyal customer base.”
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For example, Simnegar cites Netflix (NFLX), a major constituent in the communication services sector. He notes that even after nearly two decades of cutting-edge innovation, the video-streaming services giant added 41 million net new subscribers in 2024.
Similarly, Sweden-based Spotify (SPOT), also a fund holding as of August 31, has continued its pattern of healthy growth, with monthly active users rising 10% in the first quarter of 2025 and premium subscribers increasing even faster, up 12%, helped in part by the company’s move into audiobooks.
As Simnegar sees it, both businesses exemplify how a subscription model can fuel consistent growth, even in challenging times. But it’s not just entertainment firms, he is quick to note.
Within information technology, he recently bolstered the fund’s allocation to software companies, most notably via a position in Canada’s Constellation Software (CNSWF), which has transitioned to subscription plans, thereby improving revenue visibility and diversifying its income streams across about 100 niche markets throughout the world.
And from the consumer discretionary sector, he highlights positions in e-commerce majors MercadoLibre (MELI) – the market leader in Latin America – and Amazon.com (AMZN), both of which are redefining the tollbooth model by earning a percentage of every transaction, while the latter also benefits from subscription services, including Amazon Prime and Prime Video, as well as rapidly growing revenue from its fintech operations.
“All of the companies highlighted, in my view, deliver consistent value to their customers while also offering a degree of resilience to investors,” Simnegar concludes. “Moreover, they are capital-light businesses offering a high reinvestment rate, exactly what I like to see in uncertain times.”
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Sammy Simnegar is a portfolio manager in the Equity division at Fidelity Investments.
In this role, Mr. Simnegar is responsible for managing Fidelity and Fidelity Advisor International Capital Appreciation Fund, Fidelity VIP International Capital Appreciation Portfolio, Fidelity International Capital Appreciation K6 Fund, Fidelity Advisor International Capital Appreciation SMA, Fidelity Magellan Fund, Fidelity Magellan Commingled Pool, and Fidelity Magellan ETF.
Prior to assuming his current position, Mr. Simnegar managed Fidelity and Fidelity Advisor Emerging Markets Fund and Fidelity VIP Emerging Markets Portfolio, and co-managed Fidelity and Fidelity Advisor Total International Equity Fund. Additionally, Mr. Simnegar was an equity analyst at Fidelity, focusing on emerging market energy, materials, and industrials; U.S. regional banks; and real estate, hotels, and emerging telecom.
Before joining Fidelity in 1998, Mr. Simnegar worked as an equity analyst at JP Morgan, and as a senior trade analyst at Trans Alliance Group, Inc. He has been in the financial industry since 1994.
Mr. Simnegar earned his bachelor of arts degree in history from the University of California and his master of business administration degree in international finance from Columbia Business School.