Fidelity Germany A-Dis-EUR

Analyst Report
Morningstar's Take

by Natalia Wolfstetter

Fidelity Germany benefits from an experienced manager with strong stock-picking skills and extensive analytical support. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, cheaper share classes, including the Y clean share class, are upgraded to a Morningstar Analyst Rating of Gold, while the rating for the pricier retail share classes is lowered to Bronze. Christian von Engelbrechten has managed this strategy since 2011, but his involvement with the fund goes back to 2005, when he joined Fidelity as an analyst covering German stocks. Fundamental company research is at the heart of the approach, and here the manager relies extensively on Fidelity’s Europe-equity analysts, who provide in-depth coverage of the fund’s investment universe (HDAX). The fund is mostly invested in large caps, though small and mid-caps have historically accounted for up to 40% of assets. More recently, their share has been below 20%. This also drives the fund’s active share, which is currently at the lower end of its typical 40%-60% range.The manager focuses on companies’ ability to deliver structural growth. He seeks quality firms with healthy balance sheets and clear competitive advantages, as reflected in an above-average return on invested capital and profit growth. The portfolio is built around 40-50 high-conviction holdings. Yet the approach is not applied dogmatically. Deviations from the HDAX can be meaningful, but the manager keeps the benchmark in mind when constructing the portfolio. While the quality growth bias is clearly reflected in the portfolio through above-average growth, quality, and valuation metrics, it has been reined in since the fund suffered a severe underperformance in the value-oriented market of 2016. We believe this makes sense within the limited investment universe of a country fund. Performance is predominantly derived from stock selection, which has for the most part been strong over the manager’s tenure, including periods when active share trended lower. Thanks to the managers' quality bias and skillful execution, the fund has often protected capital better than peers and the benchmark in challenging conditions, including the first quarter of 2020.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleSpecialty.
Morningstar Pillars
PeopleAbove Average
A capable and experienced manager well-supported by ample research resources at Fidelity.
ParentAbove Average
Changes to the senior management team require monitoring, but we continue to consider Fidelity International an above-average parent.
The fund pursues a well-thought-out and consistently implemented bottom-up approach.
Under the manager's tenure, the strategy has served investors well.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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