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By Christopher Davis | 10-03-2012 10:00 AM

Apple's Recent Price Drop No Surprise

The decrease in the tech giant's shares are no cause for concern, says Fidelity manager Sonu Kalra, who suggests looking at past correlations between Apple's price movement and product cycles.

Christopher Davis: Hello, I'm Christopher Davis, a senior mutual fund analyst with Morningstar. I'm here today with Sonu Kalra. He is the manager of the $15.7 billion Fidelity Blue Chip Growth fund. He took over in 2009 and has fared quite well so far at the helm. I'm here today to ask him a few questions.

Sonu, you obviously, as the name of your fund implies, cover blue-chip stocks. Especially, over the past year a lot of blue-chip stocks have seen big runups, especially if they pay dividends, as investors have sought income, safety, stability. What does your playing field look like now? Are opportunities relatively scarce?

Sonu Kalra: Well, Chris, it's actually a great time to be investing in the market from my standpoint of view. It is opportunity-rich environment as how I kind of describe it. We've had a decade plus of a low-return market. Basically the market has been flat for the past decade plus, and when you look at valuations relative to historic norms, valuations are in the bottom half of historic norms. So, from a valuation standpoint things look good. When you look at high-quality stocks, in particular, they are actually trading at a discount to the market for the most part. And when you look back at history, most of the time large-cap, high-quality, dividend-paying stocks trade at a premium, and so we are in a pretty good environment for stock-picking right now.

Davis: Is this discount reflective of the fact that investors think earnings are at peak levels or at least near them there is a skepticism about the future of the economy with lots of macro headwinds out there?

Kalra: I think that's really good point, Chris. I think you touched on a lot of headwinds that the market is taking into account and hence where we are from valuation standpoint. As a portfolio manager, I work real closely with our global research team, scouring the world for ideas that we think can grow in a slow-growth environment like we've seen, and we've seen many companies over the last decade that have been able to demonstrate pretty healthy growth rates despite a relatively weak economy. So, I think, there are still a lot of opportunities out there.

Davis: One of those companies that had an outstanding decade and an outstanding year is your top position, Apple. You have around 10% of your portfolio in the stock at least as the most recent release date. So, I'm wondering, this is one of the most widely followed stocks in the world. What edge do you have in covering the stock, and where do you see its growth opportunities? How do you see it differently than the rest of the world?

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