Four Fidelity Funds Earn Medalist Morningstar Analyst Ratings

Morningstar’s analyst team has rated four Fidelity mandates. As a reminder, the Morningstar Analyst Rating for Funds is a forward-looking analysis of a fund’s likelihood to outperform. To evaluate funds, Morningstar Analysts focus on three key pillars — Process, People, and Parent. A fund that receives a medalist rating of Gold, Silver, or Bronze, is expected to outperform similar funds over a full market cycle.

The F series of the Fidelity Special Situations, Fidelity Global Innovators and Fidelity Canadian Growth Company mandates earn a Morningstar Analyst Rating of Bronze, while the F series Fidelity Canadian Opportunities earns a Silver rating.

Fidelity Global Innovators F (Bronze)

A global mandate outside of Mark Schmehl’s historical bailiwick, anchored to North American securities, earns this strategy a Morningstar Analyst Rating of Bronze for its cheapest share class and Neutral for the most expensive.

Schmehl joined Fidelity in 1999 as a research analyst covering a wide range of industries and quickly moved up the ranks to assume more responsibilities. He has been the sole portfolio manager of the Fidelity Global Innovators Class since its 2017 inception. Schmehl is also at the helm of the Fidelity Canadian Growth and Fidelity Special Situations strategy. Although Schmehl leverages Fidelity’s centralized research team, he does not rely on them for every stock that makes it into the portfolio. He consults the research teams on sectors he has not entirely focused on.

Fidelity has strong centralized research teams located across the globe. Despite running Canadian-focused funds, Schmehl interacts with US-based Fidelity Management & Research more than non-US-based Fidelity International Ltd analysts.

Schmehl’s investment process is unique and difficult to replicate which gives him a strong competitive advantage over his peers. The process focuses on two tails of the market—companies with weak fundamentals that are starting to improve, and companies at the forefront of innovation—high-expectation securities. While it may be possible for anyone to identify these areas of the market, not everyone has the level of conviction and ability to execute consistently for long stretches; that’s where Schmehl demonstrates skill.

Contrary to its name, the fund’s holdings are heavily skewed toward North American equities, which have historically represented Schmehl’s regional expertise. Investors seeking a diversified global mandate should be patient as Schmehl broadens his breadth of opportunities.

Under Schmehl’s watch, the strategy has performed admirably. From inception to July 2022, the strategy’s F-class 17.65% annualized return outpaced the Morningstar Category benchmark of 12.82% and the Morningstar Global Markets Gross Index benchmark of 10.63%.

Though Schmehl intends to manage the fund for years to come, it carries a strong key-man risk: We believe the fund is unlikely to exhibit similar returns under a different manager.

Fidelity Canadian Opportunities F (Silver)

Fidelity Canadian Opportunities’ long-tenured manager and sensible contrarian investment approach earn this strategy a Morningstar Analyst Rating of Silver for its cheapest share class and Bonze for the most expensive. 

Hugo Lavallée brings over a decade of investment experience and has been at the helm of this strategy since 2008. He is also the sole manager of the Fidelity Greater Canada and Fidelity Climate Leadership fund. Lavallée’s responsibilities at Fidelity Canada Investment Management (FCIM) have increased over the years with current involvements in final rounds of research analysts’ hirings.

As the sole portfolio manager of the fund, Lavallée is the ultimate decision-maker, however, he extensively leverages the analysts’ views and research. Lavallée and the research team have shown to be skilled in managing the strategy as reflected in a higher Alpha.   The strategy uses a practical contrarian investment approach. Rather than buying any downbeat security, Lavallée carefully scours his universe for durable businesses managed by strong teams and fundamentals that are currently faced with temporary setbacks. This process has resulted in a higher risk-adjusted return. 

The fund is anchored to Canadian equities but will often find opportunities elsewhere such as the U.S which has contributed to overall performance. The strategy has historically kept its non-Canadian holdings below 30%.   Lavallée’s 14-year track record with this thoughtful contrarian investment approach is notable. The strategy’s proclivity to outperform most peers and the index in most market cycles contributes to its long-term advantage. This is not to say it will not lag at times – in 2021 it trailed over 80% of its peers. Nonetheless, Lavallée has successfully navigated difficult periods in the past, and that experience, combined with the strategy’s other strengths, gives investors good reason to like this fund.

Fidelity Special Situations F (Bronze)

Fidelity Special Situations is backed by an industry veteran that brings a unique investment process, warranting this strategy a Morningstar Analyst Rating of Bronze.

Mark Schmehl joined Fidelity in 1999 as a research analyst covering a wide range of industries and quickly moved up the ranks to assume more responsibilities. Schmehl has been the sole portfolio manager of the Fidelity Special Situations Fund since its 2007 inception when it was specifically launched for him with CAD 1 million. Schmehl is also at the helm of the Fidelity Canadian Growth and Fidelity Global Innovators strategy. Although Schmehl leverages Fidelity’s centralized research team, he does not rely on them for every stock that makes it into the portfolio. He consults the research teams on sectors he has not entirely focused on.

Fidelity has strong centralized research teams located across the globe. Despite running Canadian-focused funds, Schmehl interacts with FMR more than FIL analysts.

Schmehl’s investment process is unique and difficult to replicate which gives him a strong competitive advantage over his peers. The process focuses on two tails of the market—companies with weak fundamentals that are starting to improve, and companies at the forefront of innovation—high-expectation securities. While it may be possible for anyone to identify these areas of the market, not everyone has the level of conviction and ability to execute consistently for long stretches; that’s where Schmehl demonstrates skill.

Under Schmehl’s watch, the strategy has performed admirably. From inception to July 2022, the strategy’s F-class 14.25% annualized return outpaced the category benchmark of 9.81% and the Morningstar Canadian Gross Index benchmark of 8.60%.

Though Schmehl intends to manage the fund for years to come, it carries a strong key-man risk: We believe the fund is unlikely to exhibit similar returns under a different manager. 

Fidelity Canadian Growth Company F (Bronze)

Fidelity Canadian Growth Company is backed by an industry veteran that brings a unique investment process, warranting this strategy a Morningstar Analyst Rating of Bronze.

Mark Schmehl joined Fidelity in 1999 as a research analyst covering a wide range of industries and quickly moved up the ranks to assume more responsibilities. Schmehl has been the sole portfolio manager of the Fidelity Canadian Growth Company since March 2011. Schmehl is also at the helm of the Fidelity Special Situations and Fidelity Global Innovators strategy. Although Schmehl leverages Fidelity’s centralized research team, he does not rely on them for every stock that makes it into the portfolio. He consults the research teams on sectors he has not entirely focused on.

Fidelity has strong centralized research teams located across the globe. Despite running Canadian-focused funds, Schmehl interacts with U.S-based Fidelity Management & Research more than non-US-based Fidelity International Ltd analysts.

Schmehl’s investment process is unique and difficult to replicate which gives him a strong competitive advantage over his peers. The process focuses on two tails of the market—companies with weak fundamentals that are starting to improve, and companies at the forefront of innovation—high-expectation securities. While it may be possible for anyone to identify these areas of the market, not everyone has the level of conviction and ability to execute consistently for long stretches—that’s where Schmehl demonstrates skill.

Despite its moniker, Fidelity Canadian Growth Company is not strictly concentrated on Canadian Growth stocks. Schmehl seeks positive change in companies and industries; hence the strategy moves from value, growth, and momentum and allocates up to 49% to non-Canadian stocks.

Under Schmehl’s watch, the strategy has performed admirably. Over the past decade through July 2022, the strategy’s F-class 16.59% annualized return outpaced the category benchmark of 9.14% and the Morningstar Canadian Gross Index benchmark of 8.52%.

Though Schmehl intends to manage the fund for years to come, it carries a strong key-man risk: We believe the fund is unlikely to exhibit similar returns under a different manager.