September, 2023
Fund underperformance was largely driven by weak stock picking across information technology (IT), industrials and financials. Performance in healthcare was mixed; gains from stock picking were offset by the overweight allocation to the sector. Luxury conglomerate LVMH declined as its sales growth failed to impress investors and raised questions about the outlook for consumer demand. Slowing economic growth in China added to concerns over the resilience of demand. However, shares rebounded later in the period, buoyed by policy support from China. Automation sensors business Keyence tracked semiconductor peers lower amid concerns about weak customer demand. Indian lender HDFC Bank declined despite reporting a broadly in-line set of secondquarter results. The bank has seen a decline in corporate loans quarter-on-quarter, while net interest income (NII) was marginally lower than expectations. Hong Kong-based insurer AIA Group suffered as investors looked to reduce exposure to China. Automotive safety supplier Autoliv posted solid results for the second quarter, driven by a stronger-thanexpected increase in adjusted profits as product launches and higher prices boosted sales. Managed care company UnitedHealth advanced after it released upbeat secondquarter results with beats on operating revenue and adjusted earnings per share (EPS). The underweight stance in iPhone maker Apple added value, as the stock fell amid new product launches.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Quarterly_Net_Sep23-1.pdfJune, 2023
Gains from stock picking within consumer discretionary and healthcare were offset by the overweight exposure to these sectors. Stock selection in IT also proved unrewarding. SolarEdge was a key detractor.
The photovoltaic products maker slumped in line with the solar equipment industry as falling prices compressed margins and factory expansions raised fears of overcapacity. Contract research organisations (CRO) ICON and IQVIA advanced as earnings beat consensus estimates in the first quarter, and as management reiterated its full-year guidance. Investors favoured the robust fundamentals of these companies in an uncertain economic environment, with the stocks rebounding as biotech funding improved slightly from previous lows. ICON also announced the latest release of its Digital Platform, which further boosted sentiment.
Shares in laboratory products supplier, Thermo Fisher, weakened after peer Agilent’s guidance fell short of consensus estimates and it trimmed its profit outlook for the year. Hearing aid manufacturer, Sonova, declined on underwhelming full-year results and disappointing earnings guidance for next year. Positions in software giant Microsoft and cloud computing major Amazon added notable value. Investors have shifted to ‘safer’ growth amid an uncertain economic outlook, as illustrated by an extremely narrow market leadership driven by a handful of US-listed mega caps. Robust quarterly earnings also supported these stocks.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Quarterly_Net_Jun23.pdfMarch, 2023
Stock picking across the consumer discretionary, consumer staples and health care sectors proved rewarding. The overweight exposure to IT and underweight allocation to financials were other sources of strength. However, holdings within communication services pared gains. Shares in luxury conglomerate LVMH rose on the back of its impressive top line in the fourth quarter, despite weakness in China. Investors focused on the prospect of wealthy Chinese households returning to physical stores and starting to travel again. Cosmetics major L’Oréal benefited from optimism surrounding China's reopening and expectations of slower interest rate hikes by the Fed. Software business Salesforce rebounded in line with other growth stocks. Microsoft’s shares benefited from the launch of a new version of its search engine Bing, now powered with artificial intelligence, which blends advanced text creation capabilities and adds recency data from a typical web search. Shares in Taiwan Semiconductor were up as its fourth quarter revenue and gross margins increased due to a more favourable foreign exchange rate and cost improvement efforts. Overall, China’s reopening was a catalyst for the stronger performance of Asian technology stocks as the market anticipated increases in technology exports to China. The underweight allocation to technology conglomerate Apple weighed on returns as its shares rebounded amid increased investor optimism. The lack of exposure to Meta Platforms was another source of weakness. Its shares continued to gain momentum after it reported decent fourth-quarter results towards the end of January. Diagnostics tool company Danaher underperformed in a risk-on market as many healthcare stocks started the year on full valuations or with questions over litigation, pricing power or demand.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Quarterly_Net_Mar23.pdfJanuary, 2023
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Monthly_Net_Jan23.pdfDecember, 2022
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FD22429_Global_Demographics_Fund_D3.pdfSeptember, 2022
Key contributors
Shares in drainage solutions manufacturer Advanced Drainage Systems rallied, driven by strong results across the board, with a 9% beat on revenues and 32% beat on earnings before interest taxes depreciation and amortisation (EBITDA). E-commerce leader Amazon benefited from a solid second quarter. While net sales beat consensus estimates as improving in-stock levels and delivery times drove demand, its Amazon Web Services (AWS) segment grew c.33% year-on-year, supported by strong backlogs. Guidance for the third quarter was also ahead of expectations. Holdings in innovative medical solutions provider Boston Scientific and medical equipment and consumables manufacturer Stryker also supported returns.
Key detractors
Hearing aid manufacturer Sonova was a notable detractor from returns, given uncertainties around slowing customer demand and elevated input costs, which cut its FY 2022 outlook. Elsewhere, the current macroeconomic environment and lower biotech funding dampened investor sentiment towards contract research organisation IQVIA. Life insurer AIA was another key detractor from performance amid a resurgence in COVID-19 cases as a new variant (B.A.5.) was found in Shanghai. Chipmaker Taiwan Semiconductor also traded lower.
June, 2022
The position in AIA, the largest independent life insurer in Asia, was the most notable contributor to performance. Shares benefitted from the relaxation of Covid restrictions in Shanghai and other Chinese cities. As China reopens its border, we expect value of new business to grow, something that will be crucial for the stock to rerate further. The lack of exposure to NVIDIA was also an expected source of strength as shares in the graphic processing units manufacturer declined amid rising fears of a slowdown in economic growth. In addition, the impact of rising interest rates on demand and investment, as well as the normalisation of inventories added to investor concerns. The position in one of the largest contract research organisations (CRO), IQVIA, advanced on decent first quarter results with an in-line topline and a 2% beat in earnings-per-share (EPS) estimates.
Shares in e-commerce giant Amazon tumbled due in our view to a rising interest rate environment, disappointing first quarter results and a weaker outlook due to higher costs. While earnings missed estimates, likely driven by weaker gross margins and higher fulfilment costs, guidance for the second quarter was also disappointing. The position in leading vacation rental business AirBnB was a notable detractor from performance, despite consensus-beating results for the first quarter of 2022. The company also released an upgraded guidance for the second quarter. However, additional Covid outbreaks and the impact of inflation on consumers’ purchasing power continue to weight on investors’ confidence. While our long-term thesis in these names remains intact, we managed position sizing at the margin to reflect earnings risk and mitigate the overall risk profile of the Fund. Consumable manufacturer, Stryker traded lower. Despite the positive recovery in elective procedures, the sub-sector saw widespread weakness probably reflecting market concerns over increase cost pressures due to supply chain issues and inflation. Financial services company Schwab Charles declined after reporting first quarter results that missed estimates, including a lower-thanexpected earnings per share versus consensus estimates.
The Fund invests in companies where earnings are driven by predictable and long-term structural drivers related to demographics. Sector positioning is aligned to demographics driven growth to harness the benefits from factors such as longer lives, with higher life expectancy; better lives, reflecting expanding middle class wealth, particularly in emerging markets; and more lives stemming from the trend of population growth. Additionally, the pandemic has accelerated many of the longterm trends that have already been in place, such as digitalisation, automation and a greater focus on health care and wellbeing. The Fund has significant exposure to these themes, and the managers expect that it will benefit from the winners in the space, thereby delivering strong growth.
In healthcare, the ageing population, which has increased health care needs, is the key demographic driver. Healthy longevity coupled with strong spending power, especially for early retirees, means that many health care companies are seeing structural growth in demand for their products. The Fund has sizeable exposure to this sub-theme and the bulk of our exposure is in the Life Sciences & Tools space, with key holdings being Thermo Fischer, ICON and IQVIA. In consumer discretionary, increasing spending capacity of the emerging middle class in developing countries provides interesting opportunities. We expect that wealth creation will continue, especially in Asia, and hold several companies that are well positioned to benefit from this trend. The Fund owns the most attractive players in luxury goods, ecommerce, sporting goods, cosmetics and high-end spirits. In addition, we observe a growing appetite for travel and leisure after two years of enforced constraints. This is reflecting in, for example, the rebound in air traffic and hotel occupancy rates. The Fund holds several stocks, such as Booking and Airbnb, that are well positioned to benefit from the uptick in consumer demand for “experiences”.
We started a position in two managed care businesses UnitedHealth and Anthem (Elevance). The managed care subsector is well positioned versus the current macroeconomic backdrop: insurers generally have pricing powers and premiums continue to grow, with profitability being largely driven by healthcare utilisation, which does not follow the economic cycle. Rising rates are also likely to provide an earnings uplift as managed care companies have significant investments in floating rate instruments and, conversely, debt denominated in fixed rate instruments. We have also taken advantage of the sharp market correction to add ASML, the leading supplier of lithography tools. Meanwhile, holdings in cleaning and sanitization products provider, Ecolab were exited over reduced risk-reward potential. We also sold the position in Naspers, the South African internet conglomerate with a c.30% stake in China’s Tencent, to mitigate our overall risk exposure to Chinese internet.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Quarterly_Net_Jun22.pdfMarch, 2021
Strong security selection in the communication services and consumer discretionary sectors contributed to returns. However, selected holdings in the industrials sector and the overweight stance in consumer discretionary held back gains. Key detractors Shares in Brookfield Renewables declined. The company has faced a particularly hostile environment due to rising oil prices and snowstorms, which paralyzed renewablesbased electric grids in some US states. On a positive note, the company has a strong financial position and agreements to expand wind generation. In Japan, holdings in electronic component maker Murata Manufacturing and Keyence, a leading factory automation group, held back gains due to rising tensions between the US and China. However, Murata stands to benefit from radio frequency connectivity growth in the fifthgeneration (5G) era as well as structural growth in ceramic condensers. Direct sales consulting and fabless production (integrated circuit design and software done in-house) puts Keyence in a strong position to gain new customers and maintain high margins. Holdings in Midea and Daikin also detracted from returns.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Quarterly_Net_Mar21.pdfFebruary, 2021
Designed to benefit from demographic trends by investing in 50 to 70 companies where demographic factors are likely to be the single most important driver of company earnings growth over the medium- to long-term.
File: https://commentary.quantreports.net/wp-content/uploads/2021/01/FundFactSheet_fidelity-global-demographics-fund_Monthly_Net_Feb21.pdfDecember, 2020
Key contributors
At a stock level, the position in luxury goods company LVMH Moët Hennessy advanced following its agreement with Tiffany to reduce its acquisition offer price. Tiffany is an attractive brand that gives LVMH a stronger position in a growing category (branded jewellery), and offers upside potential due to Tiffany’s recent underperformance. The position in aerospace and defence company Airbus advanced. Investors expect a turnaround in 2021 once COVID-19 vaccinations are rolled out and economies open up. This should lead to an eventual recovery in the aviation cycle, which makes its current valuations attractive. The position in Japanese electronic component maker Murata Manufacturing gained on the back of strong quarterly results and guidance, driven by automobiles, smartphone and PC demand. The company is expected to benefit materially from the fifth-generation (5G) roll out.
ealth care names among key detractors
Positions in healthcare equipment & supplies companies such as Thermo Fisher Scientific, Boston Scientific Corp, Baxter International and Danaher hampered performance. These COVID-19 pandemic winners were sold-off sharply following positive vaccine news. Shares in medical device manufacturer Boston Scientific were further weighed down after the company announced that it is voluntarily recalling and discontinuing the LOTUS Edge TAVR valve (a device used in cardiac procedures), presenting some short-term revenue impacts. However, the valve was a low margin product and the company’s organic growth outlook remains attractive due to its strong product pipeline. The position in Baxter International fell as the medical supplies company continues to face headwinds related to COVID-19. However, it remains a durable, defensive holding with a strong balance sheet and attractive valuations.
The holding in Alibaba fell
Shares in the e-commerce major detracted from returns. Chinese internet companies were sold-off after national regulators released a consultation paper aiming to curb anti-competitive behaviour and prevent monopolistic practices by online platforms. Additionally, sentiment towards the stock weakened following the suspension of the dual public listing of its fintech affiliate Ant Group due to regulatory issues. The position in SAP also hampered performance. The software provider released disappointing results for the third quarter, which included downward revisions to its FY20 guidance and profit growth outlook for 2021–22, provoking a sharp decline in its share price. While the reduction in its near-term growth outlook is clearly disappointing, its strategic decision to accelerate the shift from an on-premise software provider to a cloud operator should prove supportive over the longer term.
ticker: FID0023AU
release_schedule:
commentary_block: Array
factsheet_url:
Fund Flyer -> “Fund Performance”
https://www.fidelity.com.au/funds/fidelity-global-demographics-fund/
fund_features:
The Fidelity Global Demographics Fund portfolio is positioned to benefit from slow-moving, long in duration and highly predictable demographic trends. The Fund invests across three main demographic factors: ageing population, growth of the middle class, and population growth. We believe that, over time, the emphasis on holding quality names with sound underlying growth prospects has the potential to deliver strong returns.
- The Fidelity Global Demographics Fund provides investors with access to 50 to 70 companies where demographic factors are likely to be the single most important driver of company earnings growth over the medium to long term.
- The Fund aims to exploit market inefficiencies by targeting the beneficiaries of demographic trends early, seeking out companies with innovative products and services that will address evolving demographic needs.
- The Portfolio Managers follow a bottom-up stock picking fundamental approach with a quality
growth bias.
manager_contact_details: Array
asset_class: Foreign Equity
asset_category: Large Growth
peer_benchmark: Foreign Equity - Large Growth Index
broad_market_index: Developed -World Index
structure: Managed Fund