The Upside: Behind-the-scenes with Joe Overdevest: Spotting opportunities

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Subtitles are AI-Generated.

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Hello everyone and welcome to The Upside, I'm Kyle Cheropita.

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Over 2 million investors and 29,000 advisors invest

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with Fidelity here in Canada, totaling over $340 billion

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in assets under management.

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Fidelity does what's best for our clients, not shareholders.

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To inform these investment decisions, a vast investment management and research

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team in Canada and across the globe are constantly meeting with companies.

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So just how many interactions are Fidelity's investment professionals having

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every day and every year?

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What actually happens in these company meetings?

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And how does Fidelity prepare for these meetings and develop and maintain

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relationships? Joining me for a peek behind the curtain is Portfolio Manager

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Joe Overdevest. Hello Joe, thanks for joining me here today.

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My pleasure.

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So we last spoke in the studio here in June.

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We were talking about tech and AI. We had a great chat and we were joined by

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Vishal Topra, who actually dialled in remotely.

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He was joining us from a research trip in Silicon Valley.

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And a few months later, I think it was November, I sat down here with John and

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Ben, both analysts. They were also talking a bit about tech and AI software

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semiconductors and the.

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Silicon Valley research trip.

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So in both of those shows, the chat was just lighting up with people saying

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they wanted to hear more about what actually happens in these company meetings.

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And that really took us here today, today's conversation.

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So I'd love off the top of you could just dive into just how many company

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interactions Fidelity has and what are these different types of meetings that

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we have every day.

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So there's a number of meetings that take place.

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So the big buckets would be an in-house meeting where a CEO or CFO will come

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into our Finale offices and we'll meet with them.

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Number two is a conference where you'll attend a conference usually by a sector

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bias and you'll meet multiple CEOs.

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Number three will be. You actually go to head offices and actually meet

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with the company at their location.

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And number four is you'll do a video call maybe during earnings season, which

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is a busy time we'll talk about later.

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Or even during the quarter, we will have a 30 minute to one hour call maybe

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with the CEO.

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And what the benefits we have with these meetings is we have the ability to be

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hosted by. Number of investment thresholds and our size gives us that benefit

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of over 1,000 investment thresholds around the world.

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Wow. And then so you might ask, well, how many meetings are we actually doing?

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We have over 20,000 meetings each year across Fidelity.

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And so somebody that's such a big number, if you ask like, what does that mean?

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It means every eight minutes of the business day, someone from Fidelity is

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meeting executive and reporting back to us.

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It's a staggering number.

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So on a typical meeting, who is it who's going to these meetings?

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Typical meeting who will attend will be, number one, the analyst who covers

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that stock, and also number two, any portfolio managers that might have

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interest. But the analyst and portfolio managers could be across different

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groups. So it could be fixed income, it could equity, it could high yield,

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and they would all attend the meeting together.

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The analyst runs the meeting.

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So the analyst will come with an actual agenda, and the agenda will have the

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key points that we wanna get out of it. It could be sales, margins, capital

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allocation, outlook for the just general business groups So they are in.

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And the actual PMs will also be in the meeting.

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Key point we always provide is the analyst also has their model, their

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financial model with income statement, balance sheet, cash flow statement,

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forecasted out with valuation.

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So when we're in the meaning and the analyst is running it, the PMs all have

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the agenda, all have their model.

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So also can follow along where we're going with this, but also can be

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looking at the model going, okay, this is being said, in what context is that

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relevant or not relevant? And then it's, you know, it's very open to

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any portfolio manager can also ask questions and the conversation can go in

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different directions by all means, but it's nice having the analyst who's done,

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you knows the company better than anybody going, I'm gonna drive the meeting

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and from there we try to have a very fruitful discussion.

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So a lot of prep ahead of time is what I'm hearing.

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Yes, the analyst of course only covers about 20-25 stocks so knows those

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companies very well. They'll know it very in depth.

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The PMs will know it as well and they have a lot of knowledge that it's great

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to start off with the meetings and driving the discussion and making sure

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we get the key points. So you go to the meeting and then what happens

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afterwards? I think what's interesting is not just what happens in the meeting

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but the discussion right afterwards.

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So right after our meeting ends.

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The PMs and analysts will often talk rate, you know, even still standing down

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standing up We're not even sitting down yet going what do we learn from that

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and you hear from again the fixed income person the equity person?

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Could be small cap could be large cap different perspectives I go you know that

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was that was different that was interesting or that was maybe interesting for

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another company that we own That we learned from that meeting or that's

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something we need to follow up with With our own research and such like that

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Obviously the analysts will give their feedback as well.

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The analysts will then sit down their desk and write a research note and

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they'll update that research note of what was the key takeaways, does this

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strengthen or weaken my investment thesis, does this change my investment

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rating, and then also update their financial model, is there anything that

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changes there, and then they'll publish it.

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And the benefit we get at Fidelity is that when we have all these investment

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professionals around the world from Japan to Toronto to Boston, the

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research notes get disseminated to everybody.

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If you're a portfolio manager all the way to the co-op internship

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who's an analyst with our group. You'll get the same information.

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In Japan there. So what happens then if there's a group of analysts having a

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meeting with a company in Japan? Do you get to see those notes here in Toronto

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as well?

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Yes, not only do we get to see them in real time when they're published, we

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also get kept in a database for fidelity only notes.

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And so you can search the database and you can searching for keywords like AI

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or oil and gas and it'll search up and look to summarise for you

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all the notes. And so I was a past analyst, so you'll see my research notes as

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well. So multiple decades of research notes of

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all our database, so it's a great way also understanding the the baseline,

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and often in health terms they'll say that.

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The baseline means you still need to meet a CEO and you're like, is that CEO

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always positive or always negative?

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I don't know the baseline. What's great reading the research and going, you

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know, this CEO generally says this and this is their general tendencies and

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this generally the outcome. And you can actually also calibrate it to make sure

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you know where we stand historically.

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Let's do it.

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Overwhelming amount of insights you have to pour through.

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Yes, yeah, one of the benefits of Fidelity, but one of things you have to

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control is how much information and where to spend your

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time.

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And then decades too, so that means there must have been some sort of

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digitization of past written notes at some point too.

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Yes

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but many, many models and many, many notes.

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So I'd love to just pick up on something you said there about fixed income, and

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I'm just relating that to a trip I did many years ago.

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We were doing a video series down in Fidelity US's Merrimack, New Hampshire

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office, which is the big fixed income office there, and they were also talking

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about company meetings and when both the equity team goes and the fixed income

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team goes, it almost forces the C-suite you're meeting with to be a little more

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honest. Is that something that you find as well?

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Yes, I think it's great having all the stakeholders in one meeting.

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So the CEO often can talk about, well, we'll do buybacks and we'll use

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leverage. Well, both parties are there seeing the benefits of the

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company and their perspective.

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So I think that adds a very fulsome discussion for the CEO as well,

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knowing that everybody's there.

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Wow, okay, that's really cool.

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And so next, I'd love to just get into those couple buckets you talked about

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off the top there and talk a bit more about visiting companies at their own

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head office. What would you say are some of the advantages that you have to

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going seeing them on their home turf?

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I think when you go see someone on their home turf, number one is just walking

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in. Instantly you already start getting perspective.

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So sometimes the head office could be in a strip mall or it could literally

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take the entire block of a city and you're starting to understand, okay,

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where money is being spent or even the perspective of what's

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important to them. Number two is when you'd go in, he's even just seeing how

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busy the office is. I've been in offices where they walk you to the meeting.

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And all of the desks are empty, right?

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Which is not a good sign. It could be a number of things why the offices are

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empty. And then also, or you could be there very busy and buzzing and

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there's multiple things going on.

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That's a totally different feel as well kind of thing.

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And thirdly is usually when you're actually at the head office, you sometimes

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will get not only the CEO, the CFO, but different executives that are also not

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usually available on the road.

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Interesting. And you said something interesting earlier too, and that was

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that you might go into a company's office, it could be a one-off trip, could

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also be part of a research trip.

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We did talk briefly about research trips in our last chat.

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I'd love for you to expand on that a little bit more.

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Just remind the audience what happens on a research trip, how many companies

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are you seeing, what's a typical day look like.

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Research trip day, very busy.

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So essentially you will probably pick a city or generally cities that are close

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by. And so it could be the Permian for oil and gas with Houston, Dallas would

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be stops as well. Silicon Valley for tech.

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And these are places you're gonna go and you're probably gonna start, could be

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seven a.m. In the morning and it probably goes to at least seven or later in

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the night because you're probably gonna have potentially breakfast, lunch

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meetings and dinner meetings as well with company management.

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You're trying to get in as much as possible because you also have to commute to

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these head offices. But a lot of times, like I said, you can actually go to the

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head office and meet multiple executives.

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Sometimes these meetings might be three or four hours long, but not just the

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one hour because you're seeing multiple executives, also within the

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trip, there's sometimes things that are specific to that area.

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So essentially at Silicon Valley, probably we're not just seeing company CEOs,

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but also venture capital people and hearing what's going on with the new

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technology that's coming through. And that's probably not a contact you're

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going to see at a conference or definitely in-house.

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Would someone from the venture capital side be in that same meeting

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within the company? Potentially, yes.

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Would you meet them separately as well?

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So the venture capital means, at least for us as public equity market

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investors, is very interesting. So usually it's a top priority for the public

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market PMs and analysts to attend with the venture capitol.

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But yes, it would be a separate meeting along with our agenda.

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Interesting. When we were speaking before going on air here, you also said

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something cool about hotels, that even sometimes just seeing what is the price

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of the hotel, how busy is the hotel that can almost tip you off as to

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how booming an industry may or may not be.

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Yes, exactly. I mentioned two very extremes.

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Obviously, sometimes you go have a hires and lows in tech, oil and gas, where

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you'll go there and you can't get a hotel. Right.

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And sometimes you can get whatever rate you want pretty much kind of thing.

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So it is definitely an indication of how capital markets are perceiving these

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different areas. Right.

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Think about oil and gas as well.

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You get Texas, you get Alberta. I believe that the Calgary airport has, I

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think, the only Chilli's location in Canada.

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So imagine if that restaurant's booming at the time, that means a lot of

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executives from Texas are travelling up.

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When you have boots on the ground, there's a lot of indications and a lot

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of touch points of how well things are going or not.

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Yes.
Right, right. Just thinking too about the business trips, the research trips.

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When John and Ben were here, they were talking about the Silicon Valley trip

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and John being from London came over here.

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Does the F-SIM team, the Canada team, travel internationally as well?

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Yes, trips can go, again, all the way to Japan,

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to obviously anywhere in the US, to obviously Calgary, and obviously

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the UK or places in Europe. So it can be pretty broad where we go.

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Of course, China is definitely a stop for in terms of what's going on with

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natural resources last few years as well.

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Let's talk about conferences now a little bit.

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I'd love to hear more. You know, when you go to a conference, is it typically

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one company that's putting on that conference, or is it themed by industry,

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and it's numerous companies, and then how many people do you meet in a day

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there?

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Usually the conferences are themed by a sector, sometimes they can be very

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general, but usually what will happen is the agenda,

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which will be probably again, starting in the morning, going to about dinner

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time, and into sometimes dinner meetings as well,

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will have who's presenting. And usually the company's presenting in a public

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format with a big audience in front of them talking.

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And there'll be multiple companies going on for 30 minutes to an hour.

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That usually will last many conferences will be one day to sometimes three

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days. What Fidelity will do is we will crest one-on-ones

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and so most often we will actually be in the one-ons

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as opposed to the general session.

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So general session is again useful but the one-one meetings are

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usually done in a hotel room where Fidelity we'll have a time to actually ask

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the questions that they feel is beneficial to them and with the

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CEOs or CFOs and usually those meetings So 30 minutes to an hour.

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And we'll go from hotel room to hotel room and generally have a set agenda.

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Again, many days could be, again, starting in the morning goes all the way to

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the nighttime, but very beneficial to finding out what's going on in the

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sector.

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You said there are questions that are impactful, that mean the most to you.

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So what would some of those questions be? How do you prepare for these intimate

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meetings and what do you want to get out of them?

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I think when you look at investment meetings in general, people often ask, you

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know, what's the focus of it?

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Going into meetings, you the what and you know the when.

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What I mean by that is that when you go in, you know they may want to

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double earnings in five years. That's the what, when.

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The investment meetings themselves really are helpful are is how and why.

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So we want to go in there going, okay, we know these details.

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How are you going to do this? And why are you gonna do this, why is this, you

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now, how are you just going to launch this new product?

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And why do you think this new product will gain share?

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And that's building conviction. Much like people here watching a video,

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they're building conviction on a certain subject or a certain company, same

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way with us. We can read stuff in a press release.

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We can see stuff in the presentation.

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When you're interacting with a CEO or CFO, you're saying, he or she is gaining

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my confidence in this investment.

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And so maybe that will be a difference maker in that not only what I own, but

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the size of the position I take on.

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Right. And I'm sure the relationships that you've developed over time

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aid in getting these intimate meetings, too.

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Sometimes that's a very good point of like, you know, what perspective or

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strategy you want in a meeting I think one of the things I would say is that

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you know at fidelity we try to have his respect Yes, so you can often go in

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these means and go, you, know what? We're going to go with a certain angle very

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aggressive and that may work or you may think you benefit in

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some way But you also have to understand like what did you really gain and what

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did You really lose so when you go in with a strategy respect We

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will often ask questions that are maybe.

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More difficult but have to be asked, but we're always going with

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a respectful tone. And the reason why is because if you don't go in with a

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respectful tone, the CEO or CFO may not even want to answer your question

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you're asking. That's right. And may say, you know what, let's

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move on. Yeah. Okay.

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And number two more importantly is the relationship.

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Fidelity has been here for multiple decades and plans to be here for multiple

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decades. So not only for our current investors, but also our future

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investors and if we ruin a relationship, it hurts the future

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generations of our clients.

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And so we go in with a level of respect.

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They know that with Fidelity, we're gonna have respectful

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questions and this is a relationship that's gonna last multiple decades.

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Even if we own or don't own the stock, it generally does us better

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than maybe a more aggressive stance.

15:26.659 --> 15:30.396
Right. You're always just gaining information that ultimately will help our own

15:30.396 --> 15:30.963
clients in the end.

15:30.963 --> 15:32.131
Yes, exactly, yeah.

15:32.131 --> 15:36.201
I also imagine Dillon put words in your mouth, but have you gotten really

15:36.201 --> 15:38.404
good at reading people over the years?

15:38.404 --> 15:42.708
Yes. I think the more you do this, it's tough not to have

15:42.708 --> 15:45.744
maybe some benefit. And especially with our young people, it is actually

15:45.744 --> 15:47.646
teaching them, mentoring them.

15:47.646 --> 15:51.483
What do we take away from a meeting? That's why those discussions after the

15:51.483 --> 15:54.887
meeting are sometimes helpful for a young analyst who hasn't seen this person

15:54.887 --> 15:58.891
for 20 plus years where a portfolio manager has and says, you know what, this

15:58.891 --> 16:02.928
was different because of these things that I noticed that was behavioural

16:02.928 --> 16:07.066
wise different. Some of us do have certain training that was brought on

16:07.066 --> 16:11.437
and provided by Fidelity. That involves how we should, you

16:11.437 --> 16:15.007
know, read someone. It's not as much as what someone is saying or not, but are

16:15.007 --> 16:16.709
they feeling comfortable with your questioning?

16:16.709 --> 16:19.411
And there are certain clues that someone may give up.

16:19.411 --> 16:23.215
Interesting. Now, what about during the COVID days or even now on certain video

16:23.215 --> 16:25.985
calls, Zoom calls? Can you still pick up on those cues?

16:25.985 --> 16:27.152
How is that time different?

16:27.152 --> 16:31.056
I think there's definitely things, there's always data and everything.

16:31.090 --> 16:34.159
And what I mean by that is like how quickly they respond when we ask for a

16:34.159 --> 16:37.162
meeting. How quickly, who was available? Was the CEO available?

16:37.162 --> 16:39.098
Was he or she not?

16:39.098 --> 16:43.168
Definitely on the call, you can pick up things as well, just because again,

16:43.168 --> 16:44.937
the mannerisms of who they are.

16:44.937 --> 16:48.374
A video is definitely more obviously impactful than just an audio call.

16:48.374 --> 16:52.478
So again, it really helps with the baseline, getting as many data points in as

16:52.478 --> 16:56.148
possible. Keeping a strong relationship with companies again that we own and

16:56.148 --> 16:59.218
some many companies we don't even own but it could in the future

16:59.218 --> 17:02.921
Okay, now to pick up on that, I wanted to talk more about phone calls and video

17:02.921 --> 17:06.058
calls and relate that back to earnings season, which I believe we mentioned

17:06.058 --> 17:09.294
briefly off the top there. Maybe for our audience, you could start by defining

17:09.294 --> 17:11.897
what is earnings season. We have one coming up soon.

17:11.897 --> 17:14.733
And then what are you hearing from companies during that time?

17:14.733 --> 17:17.069
How does that impact your interactions?

17:17.069 --> 17:18.904
Earnings season is a very busy time.

17:18.904 --> 17:19.705
So, sent you for- Oh, I know for-

17:19.705 --> 17:22.608
Well, I know from trying to book people for these shows, they always say, not

17:22.608 --> 17:23.442
this week, yes. Thank you.

17:23.442 --> 17:27.446
Exactly. So for analysts and portfolio managers,

17:27.446 --> 17:31.717
why it's busy is the companies we invest in is they report

17:31.717 --> 17:35.687
every quarter. So every three months, they have to give

17:35.687 --> 17:39.658
their financial statements and generally do a public conference call and put

17:39.658 --> 17:42.261
out a press release. So what we're doing is portfolio managers and analysts

17:42.261 --> 17:46.865
reading the public press release, being on the public conference call,

17:46.865 --> 17:50.869
the analysts will then update the note and update models to

17:50.869 --> 17:53.338
what they were learning from the actual release.

17:53.338 --> 17:57.709
Changing any kind of forecast to have going forward, publishing that to us.

17:57.709 --> 18:01.980
So as portfolio managers will then say, okay, we took this information in,

18:01.980 --> 18:05.918
this is also what the analyst is now saying is different, and this is the

18:05.918 --> 18:10.122
output. But also that day, we'll also usually have either, if not that

18:10.122 --> 18:14.526
day pretty soon afterward, another followup call, a private conversation

18:14.526 --> 18:18.597
where we have a video call with the CEO or CFO and asking our

18:18.597 --> 18:22.067
questions again, going back to our agenda, the same agenda and style we would

18:22.067 --> 18:25.104
have in person. We would now have a video call.

18:25.104 --> 18:27.106
And so the days can be very busy.

18:27.106 --> 18:31.443
It can be multiple public calls, multiple one-on-one

18:31.443 --> 18:35.180
calls, but it's a lot of information, usually within a two or three week

18:35.180 --> 18:39.218
period, but are usually very helpful to understand what's going on

18:39.218 --> 18:40.586
in different companies.

18:40.586 --> 18:43.589
It's great to hear just how prepared everybody is.

18:43.589 --> 18:45.457
Like, you're not just going into these willy-nilly.

18:45.457 --> 18:49.094
Like, there's always an agenda. There's always a purpose.

18:49.094 --> 18:53.298
And it's just contributing to that long history of notes

18:53.298 --> 18:56.235
and information sharing. It's all really impressive.

18:56.235 --> 19:00.172
I think when the CEOs, they joke, when they meet us, they know that we'll be

19:00.172 --> 19:03.008
prepared. Right. I think that's one of the decades of notes.

19:03.008 --> 19:04.409
Decades of notes that you've read before that.

19:04.409 --> 19:08.247
Yes, and they know what to expect from a Fidelity meeting.

19:08.247 --> 19:10.949
They know that we're not going to just go there and go, okay, tell me about

19:10.949 --> 19:14.419
your company. Go through a flip book and tell me what your company, we know

19:14.419 --> 19:14.753
about your company.

19:14.753 --> 19:15.821
Company, you're way past it.

19:15.821 --> 19:19.191
So now we have an agenda of the key items.

19:19.191 --> 19:21.627
Let's just start off with, do you have any key messages?

19:21.627 --> 19:24.530
If they have a key message, okay, we can start there because I think it's

19:24.530 --> 19:28.600
always polite as well to say, you know, what key message they want instead of

19:28.600 --> 19:30.602
driving into all of our questions.

19:30.602 --> 19:34.139
But once that is delivered, then we go into our questions, they know this is

19:34.139 --> 19:38.277
gonna be a value added time for us and more importantly, respectful

19:38.277 --> 19:39.444
of their time.

19:39.444 --> 19:42.581
It's great to hear. Now one final question for you, Joe, before we wrap up

19:42.581 --> 19:46.785
today. I was curious in terms of our Fidelity's global research resources,

19:46.785 --> 19:49.421
is there anything that we didn't get to today that you'd like to touch on

19:49.421 --> 19:54.660
there? Just the size and scope, really, of what Fidelity has internationally.

19:54.660 --> 19:58.297
I think with the international presence we have, what's really interesting is

19:58.297 --> 20:01.300
we get perspective. And I think that's really important in the investment

20:01.300 --> 20:05.470
industry is not just hearing what's going on in Toronto or Montreal or

20:05.470 --> 20:09.241
Vancouver, but taking us to step back, especially in a very dynamic world we

20:09.241 --> 20:13.178
live in. When these meetings are taking place, as we said earlier, we get the

20:13.178 --> 20:16.815
research note right afterward if we're not attending the meeting by video

20:16.815 --> 20:18.617
personally as ourselves.

20:18.617 --> 20:21.687
And that's very important to get the information timely.

20:21.687 --> 20:24.923
To get the information directly from an analyst who adds perspective, what is

20:24.923 --> 20:28.927
important, what's not. And lastly, as your point says, it's not just

20:28.927 --> 20:32.798
a perspective on our country, but on what's going on in the world.

20:32.798 --> 20:35.801
All very impressive. Thank you. And just think about how many extra meetings

20:35.801 --> 20:37.502
have happened in the time we've been talking today.

20:37.502 --> 20:40.072
Yes. Well, I really appreciate you coming by here today.

20:40.072 --> 20:41.873
Thanks, Joe. My pleasure.

20:41.873 --> 20:44.243
All right. And thank you all for watching today.

20:44.243 --> 20:47.279
So here at Fidelity Canada, we're releasing new content daily.

20:47.279 --> 20:51.283
So please look up the Upside or Fidelity Connects podcast for more.

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You can get an exclusive first look at Upside shows as a streamed webcast where

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To not miss a show, head to fidel.ca and sign up for the next webcast or

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the upside newsletter. Thanks for watching today, and I hope you'll join us

21:08.400 --> 21:09.901
again. I'm Kyle Cheropita.

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Thanks for listening to, or watching, Fidelity Canada's The Upside Podcast.

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We'll wrap things up today with a quick disclaimer.

22:00.152 --> 22:03.889
The views and opinions expressed on this podcast are those of the participants

22:03.889 --> 22:07.959
and do not necessarily reflect those of Fidelity Investments Canada ULC or its

22:07.959 --> 22:11.963
affiliates. This podcast is for informational purposes only and should not

22:11.963 --> 22:14.866
be construed as investment, tax, or legal advice.

22:14.866 --> 22:18.370
It is not an offer to sell or buy or an endorsement, recommendation or

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sponsorship of any entity or security cited.

22:21.340 --> 22:24.910
Read a fund's prospectus before investing. Funds are not guaranteed.

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Their values change frequently and past performance may not be repeated.

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Fees, expenses and commissions are all associated with fund investments.

22:32.684 --> 22:35.087
Thanks for tuning in. We'll see you next time.