Why Fidelity Low-Priced Stock Is Worth a Look

Key Morningstar Metrics for Fidelity Low-Priced Stock

• Morningstar Medalist Rating: Bronze
• Process Pillar: Above Average
• People Pillar: Above Average
• Parent Pillar: Above Average

The experience of Fidelity Low-Priced Stock’s FLPSX still-new lead managers makes them well suited to run its globe-trotting portfolio, which emphasizes high-quality US mid-cap value stocks.

At the end of 2023, the fund completed a well-crafted management transition with the departure of Joel Tillinghast, its legendary manager for over three decades. His successors, co-lead managers Morgen Peck and Sam Chamovitz, had already been firmly in control of the portfolio’s decision-making for about a year.

They are good candidates to lead Fidelity Low-Priced Stock. Their lengthy careers at Fidelity have afforded them ample opportunity to work directly with Tillinghast, work with one another, and demonstrate success managing other (albeit much smaller) funds guided by similarly mild-mannered investment philosophies.

They have kept in place the key risk/reward attributes of the fund. It remains chock-full of companies with above-market profitability and below-average debt levels, and its sector positioning is similar. But in 2023, Peck and Chamovitz made some notable changes by paring back Fidelity Low-Priced Stock’s stake in large-cap stocks—including top holdings UnitedHealth Group UNH, AutoZone AZO, and Elevance Health ELV—and boosting its small- and mid-cap exposure. They also reduced the fund’s overweightings in consumer cyclicals and healthcare while narrowing the underweighting in industrials and adding to its technology stake.

The fund has long looked unlike any other US-focused small- or mid-cap fund. It broadly diversifies across more than 600 stocks and has big stakes overseas, particularly in Japan (8% of assets) and developed European markets (14% of assets).

Those features are important for coping with Fidelity Low-Priced Stock’s huge (and therefore tough-to-steer) asset base. The novelty of managing it carries some uncertainty around how Peck and Chamovitz will fare. But with a depth of resources at the managers’ disposal, Fidelity is among the few asset managers who can pull it off.

Fidelity Low-Priced Stock: Performance Highlights

From its 1989 inception through October 2024, the fund’s no-load share class gained 12.9% annualized, among the best showings of any surviving fund in the mid- or small-cap categories.

It exhibited lower volatility than relevant benchmarks and the average mid-value and mid-blend fund (its current and former category, respectively) despite an above-average foreign-equity stake.

Those stellar results owe mostly to Tillinghast’s prowess rather than his successors’. Chamovitz and Peck took full control of the portfolio around 2023’s start and are likely to maintain Fidelity Low-Priced Stock’s unique risk/reward profile. It has historically been mild-mannered, providing resilience during market selloffs but sometimes less-than-thrilling returns in bull markets.

And so, amid strong equity market returns from January 2023 through October 2024, it is unsurprising that the fund lagged relevant indexes. The magnitude of its underperformance, however, is a bit disappointing. Double-digit percentage losses in the stock prices of the portfolio’s managed-care holdings—including Humana HUM, Elevance Health, and Centene CNC—wounded it.

Fidelity Low-Priced Stock’s relative performance is also often influenced by other of its enduring exposures. Investing in industry behemoths tends to give it an edge when large-cap stocks outperform small-cap stocks, but that also holds it back when small caps are in favor. By the same token, its global exposure is an advantage when international stocks lead the US market but a disadvantage otherwise.