Manager Alex Duffy, who has worked at Fidelity since 2004 and is based in Singapore, said stock selection had contributed 95% to performance thanks to specific picks in the consumer staples and discretionary space.
This focus on stock selection was particularly important given the fund was highly concentrated with only 30-50 stocks, meaning each stock had to contribute to the portfolio’s absolute performance. It was also benchmark agnostic which gave Duffy more flexibility to pick companies and build positions on an absolute basis without needing to reference an index.
Recent positively-contributing stocks included Chinese sportswear firm Li Ning, auto dealer Zhongsheng, and soy producer Foshan Haitian.
“An example of an exceptionally positive investment decision is embodied in the holding in the Chinese sportswear manufacturer Li Ning. The company had entered into a harvesting period following many years of struggle and was set to benefit from multiple operational and strategic drivers, enabling multi-year margin expansion,” he said.
“The Chinese sportswear market was also enjoying secular growth, as penetration remained remarkably low and the change in lifestyle and health continued driving consumer behaviour.”
Stocks were selected on the basis of their strong corporate governance and ability to provide sustainable investment returns and prudently pursue reinvestment opportunities. These were also the type of stocks, he said, which would be best able to weather the market downturn and add value in the long term.
Duffy also took the opportunity to “high grade” the portfolio during the downturn by picking up high quality businesses in Taiwan and Brazil that were trading at attractive valuations. The fund also increased its exposure to industrials and reduced it to financials where Duffy was “cautious” in light of globally low interest rates and lukewarm credit demand.
