Today we speak to co-managers of Fidelity Global Small Caps Opportunity fund Connor Gordon and Chris Maludzinski as they give an update on the fund, talk about their investing strategy, and where they are finding hidden gems in North America and globally. Chris points out the fund is 60 percent US-focused, but the other 40 percent is looking more attractive as valuations come down. Chris says being able to harness Fidelity’s global resources, visit management and go to trade shows is helping the team find attractive risk-reward opportunities. Connor adds that with global allocation they don’t take a top-down view and see it as an asset class, but rather an opportunity set. For example, mining equipment includes a lot of large caps in the US, but outside of the US, they are finding what they call “hidden global champions.” Chris adds that they believe volatility creates dislocation, and dislocation creates mispricing. They are putting the work in now so that they have a list of companies with price targets that they want to execute when the time comes. They go deeper into their selection of companies. Chris says they try to find dislocations, mispricings, and high-quality companies - which for them means companies that can grow earnings above market rates of return and have multiple arbitrage. Connor adds they look for situations where a quality company is mispriced because then we can have a differentiated view. Chris and Connor also discuss how AI fits in this mispricing story, how value and growth are interconnected, and how small caps are faring in this current high interest environment.

Recorded on June 20th, 2024.

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