When volatility in U.S. equities rose in early 2025, Fidelity Portfolio Manager Zach Turner looked to capitalize by seeking companies with an attractive growth rate and a more reasonable valuation.
“I keep a list of stocks I’d like to own if their valuation ever gets appealing enough,” says Turner, who manages Fidelity® Dividend Growth Fund (FDGFX). “This tends to happen during a broad-market sell-off, as we had in March and early April, when I purchased some great consumer-driven franchises I thought were underearning on a normalized basis.”
In helming the diversified domestic equity strategy, Turner invests in a mix of large- and mid-cap stocks he believes have favorable prospects to sustainably pay and grow dividends over time. His investment philosophy centers on comparing price and value, believing price will converge with value over time.
In March 2025, the S&P 500® index fell 5.63%, led by an 8.91% drop in consumer discretionary stocks. By the end of April, the sector was down nearly 18% over the prior three months – creating potential opportunities for active managers like Turner.
One consumer stock he considerably increased exposure to was Kentucky-based mattress maker Somnigroup International (SGI), given the stock’s notable share-price decline. The company is the result of the February acquisition of Mattress Firm by Tempur Sealy International.
According to Turner, the merger united the manufacturing might of Tempur Sealy with the country’s largest mattress retailer. He believes the now vertically integrated Somnigroup will be able to capture a larger share of the U.S. mattress market and potentially realize cost savings.
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Mattress sales have declined since 2021 but could rebound in the next economic upturn, Turner suggests, with Somnigroup well-positioned in the new tariff environment, given that the company’s products are made in the United States.
Millrose Properties (MRP) also caught Turner’s eye earlier this year, as he believed the real estate investment trust was benefiting from the trend of publicly traded homebuilders taking market share from smaller players and shifting toward a capital-light business model. In February, Millrose was spun off from homebuilder Lennar, creating a REIT that provides specialized financing to homebuilders.
“Instead of buying land to build on, homebuilders are increasingly buying an option to purchase it, which is more capital efficient,” says Turner in describing why he likes Millrose. “The homebuilder then exercises the option (completes the purchase) when it is ready to commence building.”
Millrose purchases undeveloped land and keeps the option premium, whether the homebuilder eventually builds on it or not, Turner explains. Additionally, he notes that the company derives revenue from homebuilder payments for finished homesites that are ready for building to commence.
Turner believes that Millrose’s stock was undervalued mainly because investors misunderstood the company’s business model. “I think the stock is intriguing, given homebuilders’ preference for minimizing their capital outlays, along with the need for new housing due to the relatively advanced age of the U.S. housing stock.”
For specific fund information, including full holdings, please click on the fund trading symbol above. Securities mentioned were fund investments as of November 30.
Zachary Turner is a portfolio manager in the Equity division at Fidelity Investments.
In this role, Mr. Turner is responsible for managing the Fidelity and Fidelity Advisor Dividend Growth Funds.
Prior to assuming these responsibilities, Mr. Turner managed Fidelity Select IT Services Portfolio, covered information technology services and small-cap software stocks as a research analyst, and was a generalist on the Income team with a focus on dividend-growth stocks. He has been in the financial industry since joining Fidelity in 2010.
Mr. Turner earned his bachelor of science in accountancy from the University of Florida.