Why Fidelity Low-Priced Stock Still Gets a High Rating

Key Morningstar Metrics for Fidelity Low-Priced Stock

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

Fidelity Low-Priced Stock FLPSX excels because of the strength of its new leaders and disciplined investment approach.

The fund is nearing the end of a well-crafted management transition that will culminate at the end of this year with the departure of Joel Tillinghast, the strategy’s legendary manager for more than three decades. In effect, his successors, co-lead managers Morgen Peck and Sam Chamovitz, already control the fund’s decision-making, aside from a small portion that comanager Salim Hart still runs.

Peck and Chamovitz are good candidates for their new roles. Their lengthy careers at Fidelity have afforded them ample opportunity to work directly with one another and Tillinghast. They’ve also demonstrated success managing other, albeit much smaller, funds with mild-mannered investment philosophies.

They have maintained the strategy’s key risk/return attributes. It remains chock-full of companies with above-market profitability and below-average debt levels, and it favors and shuns similar sectors. In 2023, however, Peck and Chamovitz made some notable changes by paring back the fund’s stake in large-cap stocks—including top holdings UnitedHealth Group UNH, AutoZone AZO, and Elevance Health ELV—and boosting its small caps and mid-caps. They also reduced the strategy’s overweightings in consumer cyclicals and healthcare, while narrowing the fund’s industrials underweighting and adding to its tech stake.

Fidelity Low-Priced Stock has long looked unlike any other U.S.-focused small- or mid-cap fund. It owns more than 700 stocks and has big stakes overseas, including 9% of assets in Japan and 12% in developed Europe.

Those features help the fund handle its tough-to-steer $30 billion-plus asset base. There’s some uncertainty about how well Peck and Chamovitz will fare investing such a huge sum. Fidelity, with its deep resources, is among the few asset managers that can help the managers pull it off.

Fidelity Low-Priced Stock: Performance Highlights

From its 1989 inception through October 2023, the fund’s no-load share class gained 12.6% annualized, among the best showings of any surviving fund in the mid- or small-cap categories.

Fidelity Low-Priced Stock exhibited lower volatility than relevant benchmarks and the average mid-value and mid-blend fund—its current and former Morningstar Categories, respectively—despite having an above-average foreign-equity stake.

Those stellar results owe mostly to Tillinghast’s prowess rather than his successors’. Still, new co-leads Peck and Chamovitz are most likely to maintain the strategy’s unique risk/return profile. The strategy has historically been mild-mannered, providing resilience during market selloffs but sometimes less-than-thrilling returns in bull markets. Its embrace of industry behemoths tends to give it an edge when large-cap stocks outperform small caps, 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 U.S. market but a disadvantage otherwise.

Tillinghast concludes his tenure on a high note for the fund. Over the past half-decade, during which Peck and Chamovitz have contributed to its results, the strategy’s total return beat four fifths of its mid-value peers. Thanks to its subdued volatility, its risk-adjusted results also were topnotch.