Yes, reopening is still a thing

Several industries have yet to fully reopen and could see more upside, says Zach Turner.

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Even with the threat of the coronavirus delta variant, Fidelity’s Zach Turner believes the global economy continues to trend toward reopening, setting up possible opportunities for stocks he thinks still have room for more upside, despite the strong rebound from the lows of 2020.

“The global economy continues to improve, and I think the world still is making progress against COVID-19, which is why I’ve boosted exposure to several stocks in cyclically driven industries during the past several months,” says Turner, portfolio manager of Fidelity® Dividend Growth Fund (FDGFX).

One such industry is aviation, which he thinks stands to benefit as more people take to the skies and airlines begin to repair, replace, and upgrade their fleets.

For this reason, Turner has raised the fund’s stake in General Electric (GE). He notes that most of GE’s aviation profit comes from aftermarket services, making its longer-term performance more closely linked to global passenger miles flown and the number of takeoffs and landings.

GE’s fundamentals continued to strengthen in the second quarter, Turner highlights, as the company boosted cash-flow expectations for the year, while management focused on reducing debt and stabilizing its businesses. He also sees potential for the industrial conglomerate to improve results in its health care and power divisions over the coming years, the latter of which could benefit from higher sales of gas-powered turbines and hydroelectric infrastructure amid increased sustainability efforts.

Elsewhere, Turner thinks a growing economy should continue to support sales of consumer apparel, especially a handful of athletic brands he feels could be poised to boost profit and take market share from competitors. One notable example is Adidas (ADDDF), which he added to the fund this summer. His view is that Adidas is well positioned in Asia, the fastest-growing global market for athletic apparel, and could increase its earnings in North America as well.

“I like Adidas’s product cycle and branding and think it’s a good play on the overall trend toward global reopening and recovery,” he says.

Securities mentioned were fund holdings as of August 31. For specific fund information, including full holdings, please click on the fund trading symbol above.

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