Morningstar's Manager Check-Up

REAFFIRMED RATINGS: Why Morningstar fund analysts positively rate Fidelity European Growth, JP Morgan Pacific Equity and Heptagon Yacktman US Equity

Jonathan Miller 13 February, 2019 | 8:29AM
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Jonathan Miller: Welcome to the Morningstar Manager Check-up for three fund updates from our research team.

Fidelity European Growth has been run by Matt Siddle since July 2012 and despite what its name suggests, this is far from a pure growth seeker. Siddle looks for quality companies trading at attractive valuations, but also invests tactically in more expensive stocks with high growth, as well as low-quality and cheap companies.

For instance, the portfolio’s current relatively large stake in energy is driven by what he considers to be cheap valuations rather than the quality of business models in that sector. There’s low turnover of around 30% per year and stock selection has been the main source of outperformance under Siddle. This shows that he has put Fidelity’s large analyst resource to good use and the fund has retained a Morningstar Analyst Rating of Bronze.

Next up, JP Morgan Pacific Equity has been led by Aisa Ogoshi since 2012, with Robert Lloyd working alongside her. It’s worth noting though that Ogoshi’s involvement goes back to 2005, when she ran the Japanese sleeve of this strategy, that invests across Asia Pacific and Japan.

The process follows a quality and growth focus, so firms with sustainable or improving returns on invested capital, run by strong management teams, are preferred. For picking stocks, Ogoshi taps into the views of the firm’s 100-member emerging-markets and Asia-Pacific equities team, to help put together her highest-conviction ideas for the 60 stock portfolio.

Risk adjusted returns have been strong and with this effective investment approach, the fund merits a Morningstar Analyst Rating of Bronze.

Finally, the Heptagon Yacktman US Equity fund is based on a strategy run out of the US since 1992. The group is a family venture and the fund is run by Stephen Yacktman alongside Jason Subotky. They like companies with competitive advantages in areas with more predictable earnings streams.

This has led to a portfolio that exhibits big stakes in consumer-oriented companies and more recently, some tech names. The duo is valuation-aware and as shares have got more expensive in this extended cycle, they’ve been less willing to invest into rallying markets. This has been shown by the high cash stake, which was about 25% for most of 2018.

When you couple this with looking for higher quality names, this helped the fund post a positive return last year. The strategy is very different to peers and maintains a Morningstar Analyst Rating of Silver.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Fidelity European Growth Y-Acc-EUR24.91 EUR0.31Rating
Heptagon Yacktman US Equity C USD Acc363.91 USD-0.42Rating
JPM Pacific Equity C (acc) USD35.37 USD-0.15Rating

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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