The top five holdings of this value fund are LyondellBasell Industries (LYB, 5.63% of assets); Citigroup Inc (C, 4.31%); Bank of America Corporation (BAC, 3.83%); Boston Scientific Corp (BSX, 3.28%) and Cott Corp (COT.TO, 3.25%).
Fidelity Value Strategies (FSLSX)
From Fidelity Monitor & Insight
Fidelity Value Strategies (FSLSX) is now the largest holding in our Unique Opportunities Model, at 29% of assets.
Over the past nine months, the model has deemphasized both midcap value and mid-cap growth stocks. Most recently, we’ve jettisoned international small-cap growth stocks from the portfolio.
This begs the question: Why are we so excited to own more of Value Strategies, a large-cap value fund? Hint: It’s about the manager, not the fund category.
With just one exception (Blue Chip Growth) in this model, each fund position is truly distinct (dare we say “unique”?) from their respective peers. Each has a manager who pays little heed to his or her respective benchmark. In the case of Value Strategies and its manager, Tom Soviero, his benchmark is the Russell Midcap Value Index. But that’s always been something of an academic point, as he’s largely ignored it since taking the fund’s reins in 2010.
In fact, a look at the fund’s top-5 sectors shows a big underweight in financials, a traditional value sector, and overweights in growth sectors health care and consumer discretionary. That’s because Tom looks for stocks that are cheap in absolute terms (using metrics such as price-to-earnings or sales), or stocks that may be cheap relative to industry peers.
It doesn’t matter where he finds them—whether in traditional growth or value sectors. Granted, that may not sound too unique, but the twist with Tom is that many of these firms are distressed credits (as a former high yield bond manager at Fidelity, he uses his credit analysis skills on these firms). He likes the stuff that others are ignoring, especially when a turnaround is not anticipated by Wall Street. That, quite frankly, is when the best bargains are to be had. And as Value Strategies’ 9% turnover indicates, Tom patiently waits for the market to recognize the value he sees in a company.
So we are not drawn to this fund because it’s currently in the large-cap value space, but to take advantage of Tom’s unique skills in identifying cheap stocks in any sector.
Jack Bowers, John M. Boyd and John Bonnanzio, Fidelity Monitor & Insight, www.fidelitymonitor.com, 800-397-3094, August 2016