As some companies struggle to survive during the ongoing COVID-19 pandemic, one Fidelity manager is focused on a select few well-funded firms that are taking steps to position themselves for future growth.
"I like the companies that are allocating capital amid the pandemic, with an eye toward the future," says Bill Kennedy, portfolio manager of Fidelity® International Discovery Fund (FIGRX).
As an example, Kennedy points to Dublin-based Keywords Studios, a fund holding as of July 31 that specializes in consulting and outsourcing of technology applications, with particular expertise in video games. He notes that Keywords Studios (KYYWF) can modify and adapt games for their clients; for example, the company can make changes that can help game titles find success across geographies by translating languages and creating local context in the game.
According to Kennedy, the company raised more than $125 million in May to expand its acquisitions of smaller competitors in an effort to consolidate a fragmented industry.
Similarly, in May the fund participated in an equity raise by Beazley (BZLYF), a British specialty insurer. Kennedy says that in the insurance industry, new policies can only be written if the company's equity base increases. Beazley is seeking to expand, he says, by boosting its capital at a time when premiums are on the rise in many of the company's specialty areas.
"I continue to be on the lookout for companies with a strong management team and a good balance sheet that are making moves to potentially thrive amid economic weakness," Kennedy concludes.
Fidelity® International Discovery Fund held securities mentioned in this article on July 31, 2020. As of this date, Keywords Studios made up 0.42% of fund assets and Beazley accounted for 0.42%.
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