FOCUS 2026: A high-conviction approach to U.S. equities – Stephen DuFour
Stephen DuFour explains how he identifies high-conviction opportunities while navigating a changing U.S. equity landscape.
Transcript
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Welcome, Steve to Nashville.
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For anyone that was watching the
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opening introduction
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the beautiful painting behind you is
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made by your mother.
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Correct.
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Those were COVID days.
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That was my house at home so I
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like seeing that.
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Excellent, excellent, and you have
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your souvenirs to take back with you
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to Boston which is great to see.
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So why do I have a souvenir?
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You weren't asking that.
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Shannon puts these on, great job
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around the world, but this
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year she's focusing on my
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fund.
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As you think about all the
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different funds to invest in
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keep in mind on your lanyard
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it says focused.
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On the signs it says focused.
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And even on your key for your
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room it's says focused, so that's
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my intro.
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So as the portfolio manager of US
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Focused Stock this conference is all
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about you and your mandate.
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Correct.
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Correct, okay, excellent.
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Good to know.
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Well, let's dive into it.
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We have some time together to speak
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about how you invest, your style,
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what's piquing your interest these
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days, and tons to get
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through. You have been doing this
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for 35 years, we were just talking
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about that behind the scenes.
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A lot has changed over those 35
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years but what really hasn't
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is your investment style and
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process. Take us through what that
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looks like for your mandate.
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So 20 years ago
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they gave me the Focused
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Stock Fund in the US.
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It was a concentrated fund and it
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had $60 million in
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assets.
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I was told go out
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there and use a concentrated
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investment approach and
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beat the S&P 500, which
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has 503 names
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in it.
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As I came up with a strategy
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that I was gonna use and looked at
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my advantages and disadvantages, my
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big advantage is the Fidelity
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research department as well
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as access to corporate managements.
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As I researched over the years, and
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I've been a portfolio manager for
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the past 15 years,
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over long periods of time, it's
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easy to say, but stocks follow
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earnings.
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I set out to
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create a consistent product using
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36 stocks and
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buying stocks with strong
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relative earnings trading
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at attractive prices.
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As I
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explained to people I have two
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goals.
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Goal number one, crush
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the S&P 500,
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goal two, stay
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employed. Just
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like the Federal Reserve which is
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trying to do full employment
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and low inflation
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I am crush,
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stay employed.
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You can crush the S&P
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500 but then the next
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year is not so good and then
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you're home with your mom's painting
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in your house trading your
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own personal account.
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I have
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to keep my enthusiasm
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for stocks relatively
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checked.
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As I look for stocks I'm looking for
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stocks with strong relative
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earnings, trading less
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than roughly 30 times
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earnings, which is an arbitrary
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number I came up with.
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You can go further out the spectrum
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but in a concentrated vehicle
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you're taking on a lot of
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risk that you cannot mitigate on
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the downside.
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So I spend a lot of time
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mitigating the downside.
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I can
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add more Tabasco sauce to the
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fund at any time and have it
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run hot but I gotta keep
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it to a point where you can actually
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eat the stew because too
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much Tabasco gets a little spicy.
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Absolutely.
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So we're crushing the S&P but we're
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keeping our job.
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Those are the two key things which
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is really exciting to think
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about when you're managing your 36
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stocks. You have what's called
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the market monitor, right, the
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system that you use.
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One page, 36
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stocks, make your life easy, keep
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all 36 on there.
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Tell us why that number works, why
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that concentration works for you.
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I've been doing this for a while
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and roughly it's
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been 40-ish names.
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One time they updated the
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market monitor, our system for
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following stocks, they updated it
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and the person changed the font
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on the market monitor so
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that one column no longer
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was 40 names, it was 36
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names.
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I've said it must be omen so
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I moved from 40 names to 36
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because the
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tech person changed the font
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on my computer screen.
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It was meant to be.
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The technology was telling you.
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I'd like to tell you I did some
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incredible regression analysis
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looking back over the last hundred
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years and blah, blah, blah.
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No, I did none of that.
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They changed the font and I went
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with it.
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Excellent.
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In order to make one of those very
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coveted positions on
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your 36, you referenced
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it it's kind of like a soccer team.
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If you're going to sub out player A
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for player B it needs to be
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better than the current player on
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the field.
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Talk to us about how you analyze and
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what your process is for screening
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securities and equities
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to make it into that top 36.
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What goes through your mind?
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What's your process that you employ?
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Every day I have a yellow pad of
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paper and I write down what meetings
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I gotta go do, what things I need to
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do, what I'm thinking about buying,
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what I am selling.
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But at the top I write strong
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conviction and then
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I write one new name.
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My goal each day is to find
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one stock somewhere in the
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world that is better than what we
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own on our team.
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As companies come in house, as
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people report earnings, as
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I meet with outside analysts,
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wherever I'm doing things, I'm just
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trying to find one new name.
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The process is I
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have a lot of screening to
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basically weed out stuff I should
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not do any work on.
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I spend more time ...
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we don't own things that don't grow
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the revenue, we don't own things
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that don't earn money, we don't
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own companies that have
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inflated balance sheets, we
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don't know companies that don't
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produce free cash flow, we don't
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own companies that trade
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over 30 or 35
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times P/E. We're trying to
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identify companies that have strong
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relative earnings.
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The thing about the relative
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earnings is it changes each
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year.
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In '23 there was 0%
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growth in US earnings, '24 it was
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10, '25 it was 12, this
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year it's gonna be over 30, next
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year is gonna be 16-ish,
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and they're thinking the next year
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it's gonna be 15.
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I don't believe the forward forecast
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at all but that's historical.
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As I'm looking for names that are
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gonna earn their way onto the team
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you gotta be above that hurdle.
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Then you gotta take into account
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what is driving their growth.
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This year a lot of growth is being
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driven by incredible
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refining margins because of what's
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happening in Iran
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and
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Russia with refineries
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going down.
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Is that going to be going forever?
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Is it a cyclical recovery?
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Is it secular?
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You have to take into account what's
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driving the earnings and how durable
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it is.
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That's a great point because
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earnings is something I know you
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follow very, very closely.
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We heard the Global Asset Allocation
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team talking about that this morning
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with us.
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Just characterize the earnings
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backdrop today because to get over
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that hurdle it's just creeping
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higher and higher, it seems, every
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year. How are you finding companies
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that continue to make it over?
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Then just a follow up, because you
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said you find a new company every
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day but then how does it actually
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earn its spot?
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I'll do the second one.
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It earns its spot because it's gotta
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be great
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but it's then gotta be better than
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something on the team.
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Hopefully, it's great and
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not better than the team and you put
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it in a holding pattern because that
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means your team's doing great.
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If it's great, like let's
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get rid of that one, you're like,
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ooh, so that's a different thing.
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Earnings today have
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never been better
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than in my 35 years of doing
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this.
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It's not whether you
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can find good
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earnings, it's whether you
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believe in the duration of
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that earnings growth.
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Today we're becoming bond managers
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and we're talking duration.
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I never used the word duration in my
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entire career and now I'm talking
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about duration. If
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you look at the earnings growth of
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these companies you almost
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have to take a second peak.
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Companies like
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Micron, their earnings were up 600%,
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600%.
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Sandisk, 400%.
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Western Digital, 275.
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Seagate, 387.
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Numbers are going 300.
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When the hurdle is
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30 there's many companies that
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are growing well in the hundreds
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right now but the question is what
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is year two and three going to be?
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That's the problem today.
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It's not finding things that
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will jump the hurdle, it's
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believing that it's not a
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one-hit wonder.
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Absolutely.
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Speaking of finding those things,
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you're a growth manager, you're
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focused on the growth aspect of the
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market, where are those
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opportunities creeping up?
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What are you seeing?
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Growth today is
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AI and AI
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derivatives.
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As the AI
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trade has evolved
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we all were buying a
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year and a half, two years ago
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or three years ago, what is AI
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and how do we get
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involved? You got involved by owning
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chips, power,
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data, and then cooling
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and stuff like that to build a
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factory.
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All of us were owned the whole
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stack. You owned Nvidia, blah, blah
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blah.
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Then we started using AI
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and then you had to start looking at
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the use of AI which is kind of what
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we're ending now
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and ending into a new phase.
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In the using of AI we start talking
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about tokens.
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Who is using these tokens?
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How are they being stored?
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You moved into other things
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like hard
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disc drives, connectivity,
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fibre optics, lasers.
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You kind of moved from create
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a model to using a
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model.
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You moved from creating
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a model to actually using
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inference or actually people pinging
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the model and using it.
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Now we're moving into a stage where
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I'm trying to find companies that
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are actually benefiting from
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the use of the models.
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We're kind of going like this as
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this technology is
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moving very, very fast.
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I mean, two weeks ago
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Meta came out with their new agentic
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Muse product,
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it created a lot of
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new variables that need to be
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analyzed.
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Very interesting.
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One of the beautiful things about
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being a portfolio manager at
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Fidelity, access, right?
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You have access to the executive
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team at Meta, at all of these
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top frontier labs, if you want to
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call them. What are you hearing from
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them, though, in terms of the
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progression of AI?
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What's around the corner?
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What does the future hold that
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gets you excited still about being
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in this space?
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The future is
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cloudy.
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The uses are
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... you can't even imagine.
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I was telling was someone before,
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I'm old so I started before the
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internet, before the laptop.
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I sat at a desk, I had no laptop, no
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internet. Didn't even have a
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Bloomberg. As you
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see technologies it's still in
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the end find great stocks.
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AI, looking out and saying,
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oh, AI is not gonna work because I
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don't see ...
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I'm gonna leave here in a couple
12:19.972 --> 12:21.373
hours. I'm gonna go to my phone, I'm
12:21.373 --> 12:23.375
gonna hit Uber and a car is
12:23.375 --> 12:24.143
gonna show up.
12:24.143 --> 12:26.178
You tell me if anyone knew that in
12:26.178 --> 12:27.880
1998 that you're gonna hit a button
12:27.880 --> 12:29.515
and some guy is gonna drive you to
12:29.515 --> 12:30.516
the airport.
12:31.951 --> 12:34.120
Amazon Prime and Netflix
12:34.120 --> 12:35.921
and all these things that came out
12:35.921 --> 12:36.756
of the internet age.
12:36.756 --> 12:38.791
When people were poo-pooing
12:38.791 --> 12:40.493
the internet age because it was
12:40.493 --> 12:42.695
pets.com and all this other stuff
12:42.695 --> 12:44.530
they didn't look past and
12:44.530 --> 12:46.132
see ... look at this stuff that has
12:46.132 --> 12:46.999
changed the way we do e-commerce,
12:46.999 --> 12:48.868
the way we do all
12:48.868 --> 12:50.736
this stuff. That's what's going to
12:50.736 --> 12:51.570
happen with AI.
12:51.570 --> 12:53.305
I think it's going to show up in
12:53.305 --> 12:54.240
robotics.
12:54.240 --> 12:55.441
I think is going to be in autonomous
12:55.441 --> 12:56.909
vehicles.
12:56.909 --> 12:58.477
All this stuff is going be used
12:58.477 --> 13:01.080
because it can be calculating
13:01.080 --> 13:02.381
real time data.
13:02.381 --> 13:03.382
Agentic shopping, hopefully
13:06.552 --> 13:08.487
not agentic portfolio
13:08.487 --> 13:10.089
managers but maybe agentic
13:10.089 --> 13:11.791
portfolios managers.
13:11.791 --> 13:13.692
There's going to be things that
13:13.692 --> 13:14.693
are coming.
13:15.161 --> 13:16.695
They can say what they want but the
13:16.695 --> 13:18.264
genie's out of the bottle.
13:18.264 --> 13:20.299
This idea of, oh, let's
13:20.299 --> 13:21.834
just stop and take a pause
13:23.002 --> 13:24.403
is not going to happen.
13:24.403 --> 13:25.771
But you're still very optimistic
13:25.771 --> 13:26.438
about the future.
13:26.438 --> 13:27.773
I'm extremely optimistic.
13:27.773 --> 13:28.507
Excellent.
13:28.507 --> 13:30.976
But I'm not optimistic on
13:30.976 --> 13:32.778
what model's going to
13:32.778 --> 13:35.414
work. I'm not optimistic on this.
13:35.414 --> 13:37.416
I'm optimist that at the
13:37.416 --> 13:39.718
bottom of the pyramid
13:39.718 --> 13:41.921
token usage is
13:41.921 --> 13:43.055
going to increase.
13:44.824 --> 13:46.859
We, companies,
13:46.859 --> 13:49.094
countries, our car,
13:50.629 --> 13:53.432
our air conditioning unit, our TV,
13:53.432 --> 13:55.301
all this stuff
13:55.301 --> 13:57.870
is going to be using tokens
13:57.870 --> 13:59.905
24 hours a day.
13:59.905 --> 14:01.874
As that continues
14:01.874 --> 14:03.943
I wanna be involved in the
14:03.943 --> 14:05.511
bottom of the stack.
14:05.511 --> 14:07.346
Who's gonna be the winner?
14:07.346 --> 14:09.615
Very, very, very hard to figure out.
14:10.850 --> 14:12.685
It's still very murky
14:12.685 --> 14:14.720
but I'm a believer that the
14:14.720 --> 14:16.622
usage of tokens is going one
14:16.622 --> 14:17.423
way.
14:17.423 --> 14:18.524
Excellent.
14:18.524 --> 14:20.492
So still a lot of conviction in AI.
14:20.492 --> 14:22.461
You also, though, have some exciting
14:22.461 --> 14:23.929
themes I would say outside of
14:23.929 --> 14:25.798
technology and outside of the AI.
14:25.798 --> 14:27.600
Let's talk about those a little bit.
14:27.600 --> 14:29.535
Growth opportunities that follow
14:29.535 --> 14:32.838
within your 36 market
14:32.838 --> 14:34.640
monitor there, what are you excited
14:34.640 --> 14:36.642
about in terms of other areas that
14:36.642 --> 14:39.044
could either be derivatives of the
14:39.044 --> 14:40.145
AI trade or just completely
14:40.145 --> 14:41.213
separate.
14:41.213 --> 14:43.315
Well, two areas.
14:44.416 --> 14:45.417
The first would be healthcare.
14:47.853 --> 14:50.089
GLP-1s, I think, is just
14:50.089 --> 14:52.658
touching the surface on
14:52.658 --> 14:54.493
the
14:54.493 --> 14:56.262
diseases and other things that they
14:56.262 --> 14:58.297
can address, not just
14:58.297 --> 15:00.900
obesity and diabetes.
15:00.900 --> 15:02.468
It's going to continue to grow,
15:02.468 --> 15:04.503
that's just starting.
15:08.340 --> 15:10.209
Cancer vaccines is another
15:10.209 --> 15:12.311
new area which is very exciting.
15:12.311 --> 15:14.446
We have two names involved
15:14.446 --> 15:16.015
in that and doing very well.
15:16.015 --> 15:17.816
I think that they've coming ...
15:17.850 --> 15:19.818
as AI and other things, I think
15:19.818 --> 15:21.820
the targets, as
15:21.820 --> 15:23.689
well as everything, is going to get
15:23.689 --> 15:25.758
tighter for companies as they
15:25.758 --> 15:27.993
find ways to use novel
15:27.993 --> 15:28.794
medicines.
15:28.794 --> 15:30.629
Then also a derivative play
15:30.629 --> 15:32.531
in healthcare is
15:32.531 --> 15:34.233
pipettes.
15:34.233 --> 15:36.402
Just like we did with
15:36.402 --> 15:38.270
AI, creating AI,
15:38.270 --> 15:40.372
we bought the
15:40.372 --> 15:42.474
shovels and the picks in order to
15:42.474 --> 15:43.575
create AI.
15:43.575 --> 15:45.711
AI now is moving into healthcare
15:45.711 --> 15:48.347
and is doing rapid,
15:48.347 --> 15:50.182
rapid tests
15:50.182 --> 15:52.151
to determine whether this stuff
15:52.151 --> 15:53.686
is going to work on this thing.
15:53.686 --> 15:56.121
But you still need to have pipettes.
15:58.290 --> 15:59.224
Actually, I'm moving ... I have a
15:59.224 --> 16:01.560
number of names that are playing in
16:01.560 --> 16:02.861
the ...
16:02.861 --> 16:04.830
it's going to be an increase in
16:04.830 --> 16:07.533
R&D in healthcare
16:07.533 --> 16:09.535
as AI is replacing
16:09.535 --> 16:10.769
some of the manual
16:12.638 --> 16:13.672
ways they were doing it
16:13.672 --> 16:15.507
historically. So that's good.
16:15.541 --> 16:17.309
Another area would be finance.
16:17.309 --> 16:18.510
Finance is
16:20.112 --> 16:21.914
evolving a number of new
16:21.914 --> 16:23.749
products which we don't know the
16:23.749 --> 16:25.718
end market to, or the end
16:25.718 --> 16:27.553
game to yet, whether it's going to
16:27.553 --> 16:28.554
be stablecoins, whether
16:30.189 --> 16:32.324
it's going to be crypto, whether
16:32.324 --> 16:34.393
it going to be
16:34.393 --> 16:35.260
tokenized securities and 24-hour
16:35.260 --> 16:36.261
trading.
16:37.730 --> 16:39.298
These companies are getting into
16:39.298 --> 16:41.100
prediction markets and people
16:41.100 --> 16:42.701
are using prediction markets outside
16:42.701 --> 16:44.536
of whether the Redskins are
16:44.536 --> 16:46.138
going to beat the Cowboys, or the
16:46.138 --> 16:47.039
Giants are going to beat the Eagles.
16:47.039 --> 16:48.040
I
16:49.808 --> 16:50.909
grew up in D.C.
16:50.909 --> 16:51.944
so that's my team.
16:57.516 --> 16:59.785
That area is ripe for
16:59.785 --> 17:00.786
innovation.
17:02.855 --> 17:03.856
We have
17:05.090 --> 17:06.959
companies that are implementing
17:06.959 --> 17:09.228
AI early as
17:09.228 --> 17:11.030
well as companies that are
17:11.030 --> 17:13.499
implementing AI for companies.
17:13.499 --> 17:15.200
If you're a company and you're
17:15.200 --> 17:17.669
making cereal or
17:17.669 --> 17:19.705
paper or
17:19.705 --> 17:21.240
whatever it is you really don't have
17:21.240 --> 17:23.175
the talent in house
17:23.175 --> 17:25.177
to actually take this new
17:25.177 --> 17:27.312
technology and apply it
17:27.312 --> 17:29.181
in a productive way.
17:29.181 --> 17:31.483
Those are some of the areas that
17:31.483 --> 17:33.185
I'm excited about.
17:33.185 --> 17:34.553
Excellent.
17:34.553 --> 17:36.422
Sticking on the AI theme there is
17:36.422 --> 17:37.923
a question here from the audience.
17:37.923 --> 17:40.025
Within AI, TSMC,
17:40.025 --> 17:41.026
so Taiwan
17:41.960 --> 17:42.795
Semiconductors, is a top position
within the portfolio.
17:42.795 --> 17:44.229
What drives your conviction in the
17:44.229 --> 17:45.230
company?
17:46.198 --> 17:47.199
If you go back
17:49.068 --> 17:50.436
20 or some years ago
17:51.603 --> 17:52.738
everyone ...
17:52.738 --> 17:54.807
you made a chip, you had your own
17:54.807 --> 17:56.408
factory and then you made the chip
17:56.408 --> 17:57.976
and then sold it.
17:57.976 --> 17:59.812
Everyone decided it was a good idea
17:59.812 --> 18:01.346
that we're no longer gonna have our
18:01.346 --> 18:02.848
factory and we're gonna outsource
18:02.848 --> 18:04.983
the production of the chips to
18:04.983 --> 18:06.585
a foundry.
18:06.585 --> 18:07.753
A lot of the foundries around the
18:07.753 --> 18:09.588
world didn't do well and
18:09.588 --> 18:11.790
TSMC has garnered the
18:11.790 --> 18:13.659
vast majority of at least the high
18:13.659 --> 18:15.060
end types of chips.
18:15.060 --> 18:16.962
As companies are
18:16.962 --> 18:18.764
taping up new chips and coming up
18:18.764 --> 18:20.632
with new things they still have to
18:20.632 --> 18:22.568
go through TSMC
18:22.568 --> 18:24.036
to get the end product.
18:25.170 --> 18:27.072
As the number of
18:27.072 --> 18:29.875
uses of AI proliferate,
18:29.875 --> 18:31.477
whether it's used for chips that are
18:31.477 --> 18:33.512
gonna lower the cost of inference,
18:33.512 --> 18:34.947
whether it is chips that are going
18:34.947 --> 18:36.949
to spread the queries
18:36.949 --> 18:39.284
out to the lowest cost of
18:39.284 --> 18:41.386
usage, or whatever it is, the
18:41.386 --> 18:43.856
number of chips is exploding and
18:43.856 --> 18:45.924
the gate to get them made
18:45.924 --> 18:47.726
is not changing.
18:47.726 --> 18:49.761
Intel is trying, and the
18:49.761 --> 18:51.163
key word in that sentence is trying
18:53.132 --> 18:55.567
but the gate right now is TSMC.
18:55.567 --> 18:57.035
While it's not in the S&P 500
18:58.170 --> 19:00.105
as I do my work on the chips and
19:00.105 --> 19:02.007
all this stuff, every time I
19:02.007 --> 19:03.809
talk to someone, we could grow
19:03.809 --> 19:05.144
faster if we could just get more
19:05.144 --> 19:06.178
chips from TSM.
19:06.178 --> 19:08.680
We'd grow faster if we can do this.
19:08.680 --> 19:09.548
So they have that piece of the
19:09.548 --> 19:10.149
market pretty [crosstalk].
19:10.149 --> 19:11.850
It's got a very good spot right now.
19:11.850 --> 19:12.851
Understood.
19:13.552 --> 19:15.621
Let's just pivot back into
19:15.621 --> 19:17.189
where we're at in terms of the
19:17.189 --> 19:18.991
market. A lot of optimism around AI,
19:18.991 --> 19:20.859
I know you're very bullish on it,
19:20.859 --> 19:22.294
but should we see a market pullback,
19:22.294 --> 19:24.296
maybe just talk to us about what
19:24.296 --> 19:25.931
do you do during times like that?
19:25.931 --> 19:27.799
Over your 35 career you've obviously
19:27.799 --> 19:29.935
seen different periods of pullbacks.
19:29.935 --> 19:31.837
How do you deploy your strategy
19:31.837 --> 19:33.672
to protect the portfolio in
19:33.672 --> 19:35.274
a growth mindset?
19:35.274 --> 19:37.209
The key, or what
19:37.209 --> 19:38.977
I found the key to downturns, and
19:38.977 --> 19:41.079
there's gonna be downturn, is the
19:41.079 --> 19:43.048
first couple days of the downturn
19:43.081 --> 19:45.150
you pick a couple things and
19:45.150 --> 19:46.218
you sell it.
19:46.218 --> 19:47.886
Just sell some stuff because you
19:47.886 --> 19:49.488
gotta get the angst out of your
19:49.521 --> 19:51.723
body. It's like, you know what, the
19:51.723 --> 19:53.559
market's correct, everything's gonna
19:53.559 --> 19:55.294
go to zero, the world's gonna end
19:55.294 --> 19:56.428
and so you sell a couple of things
19:56.461 --> 19:57.729
and you say to yourself, all right,
19:57.729 --> 19:59.131
whew, I feel better.
19:59.131 --> 20:01.200
And then as it keeps going down
20:01.200 --> 20:02.634
you gotta go to greed and you gotta
20:02.634 --> 20:04.503
say, all right, we do
20:04.503 --> 20:05.971
this, we go into these things, we
20:05.971 --> 20:07.906
come out. Every time I look
20:07.906 --> 20:09.775
back I say to myself why didn't
20:09.775 --> 20:11.677
I high-grade the
20:11.677 --> 20:12.811
portfolio during the thing.
20:12.811 --> 20:13.812
And then you say to yourself, all
right, who
20:15.247 --> 20:17.282
are my two or three weaker players
20:17.282 --> 20:18.283
on the team?
20:18.283 --> 20:20.118
Either get rid of them or lower
20:20.118 --> 20:22.387
their weights and you buy
20:22.421 --> 20:24.223
the stronger. When you come out
20:24.223 --> 20:25.891
of this thing you're not just
20:25.891 --> 20:27.292
survive it you actually
20:29.795 --> 20:30.796
slingshot out.
20:33.599 --> 20:34.933
But you don't want to be too early
20:34.933 --> 20:36.268
so you've got to sell some to make
20:36.301 --> 20:37.269
yourself feel okay,
20:38.136 --> 20:40.005
get in a bad mood, then get
20:40.005 --> 20:42.307
greedy, and then start buying.
20:42.307 --> 20:44.209
It's a process
20:44.209 --> 20:45.277
you have to go through.
20:45.277 --> 20:46.678
And is this a process that's just
20:46.678 --> 20:48.213
evolved over your tenure, evolved
20:48.213 --> 20:50.549
over experience, evolved over..
20:50.549 --> 20:52.517
Early on you're like, oh,
20:52.517 --> 20:53.919
man, you sell this stuff.
20:53.919 --> 20:55.287
And then you sit there, and and then
20:55.287 --> 20:56.421
it goes up. You're, like, God darn
20:56.421 --> 20:57.689
it, and then you buy some of it
20:57.689 --> 20:59.258
back. No, no, that's not a good way
20:59.258 --> 21:00.325
to go.
21:00.325 --> 21:02.527
You want to improve your
21:02.527 --> 21:04.696
cost base in the name during
21:04.696 --> 21:05.697
the downturn.
21:05.697 --> 21:06.698
Excellent.
21:09.001 --> 21:09.868
You're a US portfolio, US Focused
21:09.901 --> 21:10.936
Stock, as you all take your lanyards
21:10.936 --> 21:12.237
home you'll think of Steve,
21:13.472 --> 21:14.640
advertising right there.
21:15.941 --> 21:17.009
Why US equities today?
21:17.009 --> 21:18.610
We've seen some diversification
21:18.610 --> 21:20.345
globally over the past couple of
21:20.345 --> 21:21.346
years.
21:22.714 --> 21:23.682
You run a US portfolio so what's
21:23.682 --> 21:25.017
your conviction, what's your story
21:25.017 --> 21:27.219
as to why the US in today's
21:27.219 --> 21:28.220
world?
21:29.154 --> 21:30.722
Wow, that's a ...
21:30.722 --> 21:32.057
how long do we have?
21:32.057 --> 21:32.624
Five minutes.
21:32.624 --> 21:34.059
Okay, we have five minute.
21:34.059 --> 21:36.928
I'm not gonna get into asset
21:36.928 --> 21:38.764
diversification but
21:38.764 --> 21:40.666
the 10-year getting
21:40.666 --> 21:42.601
above 5, I'm
21:42.601 --> 21:44.670
a big believer in the rule of
21:44.670 --> 21:46.204
... some people use rule of 21, I
21:46.204 --> 21:47.973
use kind of rule of 23 where you
21:47.973 --> 21:49.875
take the 23 minus the
21:49.875 --> 21:51.076
10-year and that should be the P/E
21:51.076 --> 21:52.077
in the market.
21:52.744 --> 21:55.013
As you look at the P/E,
21:55.013 --> 21:56.515
and the market has done a good job
21:56.515 --> 21:58.517
of taking the P/E of our market from
21:58.517 --> 22:00.719
the 20s into the teens.
22:02.287 --> 22:03.288
People say, oh, they're worried about
AI. I'm
22:04.423 --> 22:06.425
just not convinced it was the market
22:06.425 --> 22:08.660
doing what the market does which is,
22:08.660 --> 22:09.661
you know what, if
22:10.762 --> 22:11.763
interest rates are going like this,
22:11.763 --> 22:14.099
P/E's gotta go like this.
22:14.099 --> 22:15.100
I keep an eye on that
22:18.337 --> 22:20.439
but the US has a number
22:20.439 --> 22:22.441
of industries as well as
22:22.441 --> 22:24.309
deep financial
22:24.309 --> 22:25.310
resources so new
22:27.846 --> 22:29.848
technologies are coming out
22:29.848 --> 22:31.049
of the US.
22:31.049 --> 22:32.918
A lot of the new healthcare
22:32.951 --> 22:34.753
innovations are coming out of the
22:34.753 --> 22:35.754
US.
22:35.854 --> 22:38.256
There's areas where we're
22:38.256 --> 22:39.224
not ...
22:39.224 --> 22:40.559
fashion, you're better off owning
22:40.559 --> 22:42.694
Louis Vuitton than Coach.
22:42.694 --> 22:44.529
If you're looking
22:44.529 --> 22:46.832
at sneakers, Nike's
22:46.832 --> 22:48.200
over and you're better off going
22:48.200 --> 22:49.835
and owning On.
22:49.835 --> 22:51.370
But there are certain things where
22:51.370 --> 22:53.238
you're like, okay, but if you
22:53.238 --> 22:54.606
are looking at some of these newer
22:54.606 --> 22:56.641
industries a lot of the
22:56.641 --> 22:58.510
new innovation is still coming
22:58.510 --> 23:00.212
out of people dropping out of
23:00.212 --> 23:02.114
Stanford after three
23:02.114 --> 23:04.282
months in college and getting funded
23:04.282 --> 23:06.118
in a garage and creating a
23:06.118 --> 23:07.119
new technology.
23:08.253 --> 23:10.589
That is why
23:10.589 --> 23:11.456
you ....
23:11.456 --> 23:13.392
I also run
23:13.392 --> 23:15.761
a worldwide fund with
23:15.761 --> 23:17.796
Bill Kennedy and as I
23:17.796 --> 23:19.698
look at all the opportunities
23:19.698 --> 23:22.367
around the world there
23:22.367 --> 23:24.269
is places where we
23:24.269 --> 23:26.104
decide where to allocate the money
23:26.104 --> 23:27.739
that the US is the best.
23:28.874 --> 23:30.642
There's places, a lot of it in
23:30.642 --> 23:32.544
finance, in utilities
23:32.544 --> 23:34.379
that are much
23:34.379 --> 23:36.248
better outside. They have better
23:36.248 --> 23:37.582
population growth, they have better
23:37.582 --> 23:38.884
regulation, things like that.
23:38.884 --> 23:40.786
There's just different sectors.
23:40.786 --> 23:42.020
I'm not saying one's better than the
23:42.020 --> 23:43.422
other. I'm just saying there's
23:43.422 --> 23:45.524
better sectors you can get
23:45.524 --> 23:47.459
exposed to in the US
23:47.459 --> 23:49.561
and there's better outside.
23:49.561 --> 23:50.896
So that worldwide fund would be for
23:50.896 --> 23:53.031
US investors only but good
23:53.031 --> 23:54.900
to know that you
23:54.900 --> 23:57.702
are looking outside of just
23:57.702 --> 23:59.604
your home and taking
23:59.604 --> 24:01.740
into account what's happening around
24:01.740 --> 24:02.741
the world.
24:03.408 --> 24:04.609
There's been the conversation around
24:04.609 --> 24:06.545
China and their innovation
24:06.545 --> 24:08.280
and is that a threat to what's
24:08.280 --> 24:10.148
happening on US soil in terms of
24:10.148 --> 24:11.216
the productivity, the innovation,
24:11.216 --> 24:13.185
what we're seeing come forward.
24:13.185 --> 24:15.086
Are those things that you pay
24:15.086 --> 24:16.521
attention to or you just stay
24:16.521 --> 24:18.490
focused primarily for this
24:18.490 --> 24:19.191
mandate?
24:19.191 --> 24:20.192
No, you got to
24:22.894 --> 24:24.229
... I do not own a Chinese stock in
24:24.229 --> 24:25.230
any of my funds.
24:31.837 --> 24:33.905
I just
24:33.905 --> 24:35.440
haven't found one that I fell in
24:35.440 --> 24:37.375
love with. As I look at it,
24:37.375 --> 24:38.810
you have to understand if we own
24:38.810 --> 24:39.811
hard disc drives
24:41.079 --> 24:42.914
what is the threat of
24:42.914 --> 24:44.749
a lower price hard disc
24:44.749 --> 24:45.717
drive out of China?
24:45.717 --> 24:47.586
If you own DRAM what is a threat
24:47.586 --> 24:48.954
from their DRAM thing?
24:48.954 --> 24:51.656
If you own Apple, if you own Tesla,
24:51.656 --> 24:53.158
how does BYD?
24:53.158 --> 24:54.926
I am constantly going to the
24:54.926 --> 24:56.695
meetings, I'm constantly learning.
24:56.695 --> 24:57.696
I haven't one
24:59.364 --> 25:01.433
that I'm interested in yet
25:01.433 --> 25:03.335
but you have to understand
25:03.335 --> 25:04.135
what the threat is.
25:04.135 --> 25:05.971
Yeah, know more from an educational
25:05.971 --> 25:07.072
perspective.
25:07.072 --> 25:07.906
We only have a couple of minutes
25:07.906 --> 25:09.074
left, talk to us about
25:09.074 --> 25:11.710
diversification within the mandate
25:11.710 --> 25:13.945
because you look at it, it's 36,
25:13.945 --> 25:15.614
it' concentrated, it's heavy AI, do
25:17.048 --> 25:18.216
you look at diversification?
25:21.119 --> 25:23.054
Dual mandate,
25:23.054 --> 25:24.990
crush, stay employed.
25:24.990 --> 25:27.025
The stay employed me would
25:27.025 --> 25:29.895
love to be sector neutral
25:29.895 --> 25:31.830
with a .95
25:31.830 --> 25:33.365
beta and a
25:34.699 --> 25:37.469
2.87 tracking error
25:37.469 --> 25:39.104
and I would like to go blue fishing
25:39.104 --> 25:40.939
off the coast of
25:40.939 --> 25:42.173
Massachusetts every day.
25:43.942 --> 25:44.910
That is not how ...
25:44.910 --> 25:46.745
I own the
25:46.745 --> 25:48.847
best names available.
25:48.847 --> 25:50.815
If there's a new name available in
25:50.815 --> 25:53.718
a sector that we don't own anything,
25:53.718 --> 25:55.554
does it get a little more
25:55.554 --> 25:57.489
emphasis? If you came to me today
25:57.489 --> 25:59.758
with a staple stock that
25:59.758 --> 26:02.193
over 17%
26:02.193 --> 26:04.029
EPS growth, trading at less
26:04.029 --> 26:05.897
than 24 1/2 P/E,
26:05.897 --> 26:07.532
with a good outlook, blah, blah
26:07.532 --> 26:09.467
blah, I would buy it all
26:09.467 --> 26:10.468
day.
26:13.371 --> 26:14.940
Right now we don't own a utility.
26:16.241 --> 26:18.910
We don't own real estate.
26:18.910 --> 26:21.980
We don't own much staples.
26:21.980 --> 26:23.248
If you're looking for
26:23.248 --> 26:25.650
diversification against the sectors
26:25.650 --> 26:27.452
this is not the fund because I
26:27.452 --> 26:30.188
go where the heat is.
26:30.188 --> 26:32.657
Right now there's no
26:32.657 --> 26:36.027
... I mean, home building, autos,
26:36.027 --> 26:37.228
RVs,
26:38.463 --> 26:39.464
home improvement stocks, you
26:43.468 --> 26:45.270
look at them and you're like that's
26:45.270 --> 26:46.438
just not going to be in our fund.
26:47.739 --> 26:49.474
There's whole parts of the market,
26:49.474 --> 26:51.242
for me, that are uninvestable
26:51.242 --> 26:53.244
because right now their
26:53.244 --> 26:55.714
numbers are bad.
26:55.714 --> 26:57.115
That's very helpful in setting the
26:57.115 --> 26:58.450
groundwork for this mandate.
26:58.450 --> 27:00.018
I think what we've all taken away is
27:00.018 --> 27:02.287
crush the S&P, stay employed,
27:03.722 --> 27:05.757
AI, big theme, and
27:05.757 --> 27:07.359
we're going to be very excited to
27:07.359 --> 27:09.160
see what holds next for US Focused
27:09.160 --> 27:10.528
Stock. Any final thoughts?
27:10.528 --> 27:11.529
Any final comments?
27:12.831 --> 27:14.866
People ask why
27:14.866 --> 27:15.700
should you own this fund?
27:15.700 --> 27:17.736
I think
27:17.736 --> 27:19.537
you should have a portfolio
27:19.571 --> 27:21.306
of vanilla and chocolate ice cream
27:21.306 --> 27:23.308
and then the focused fund is
27:23.308 --> 27:24.843
chocolate sauce or caramel, because
27:24.843 --> 27:25.844
it's not diversified, it's
27:27.178 --> 27:28.513
concentrated.
27:28.513 --> 27:30.515
I take more risk than
27:30.515 --> 27:32.651
most people take but I
27:32.651 --> 27:33.752
like it. I love it.
27:33.752 --> 27:34.753
It shouldn't
27:36.655 --> 27:37.856
be your whole portfolio but I think
27:37.856 --> 27:38.790
it should be part of your portfolio.
27:38.790 --> 27:40.091
If you're looking a little sauce on
27:40.091 --> 27:42.394
your portfolio look at Steve Dufour.
27:42.394 --> 27:43.628
Excellent, thank you for your time,
27:43.662 --> 27:44.562
Steve. Thank you for being here with
27:44.562 --> 27:45.530
us.
27:48.500 --> 27:50.435
Thanks for listening to the
27:50.435 --> 27:52.237
FidelityConnects podcast.
27:52.237 --> 27:55.240
If you haven't done so already, please subscribe
27:55.240 --> 27:57.208
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27:58.810 --> 28:01.279
And if you like what you're hearing, leave a
28:01.279 --> 28:04.015
review or a 5 star rating.
28:04.015 --> 28:06.751
For more information on upcoming
28:06.751 --> 28:09.954
live webcasts, please visit Fidelity.ca.
28:09.954 --> 28:11.990
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28:11.990 --> 28:14.893
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28:14.893 --> 28:17.362
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28:17.362 --> 28:20.999
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28:20.999 --> 28:22.801
We'll end today's podcast with
28:22.801 --> 28:25.236
a short disclaimer.
28:25.236 --> 28:27.972
The views and opinions expressed on this podcast are
28:27.972 --> 28:30.508
those of the participants, and do not
28:30.508 --> 28:31.509
necessarily reflect the views of Fidelity Investments
28:31.509 --> 28:32.277
Canada ULC, or
28:32.277 --> 28:34.913
any affiliated companies.
28:34.913 --> 28:36.514
This podcast is for
28:36.514 --> 28:37.916
informational purposes only and should
28:37.916 --> 28:39.484
not be construed as investment,
28:39.484 --> 28:40.685
legal, or tax advice.
28:40.685 --> 28:41.352
It is not an offer to
28:41.352 --> 28:42.587
buy or sell or an
28:42.587 --> 28:45.256
endorsement, recommendation, or sponsorship of any
28:45.256 --> 28:47.559
securities or entities cited.
28:47.559 --> 28:49.761
Read a fund's prospectus before
28:49.761 --> 28:51.629
investing. Funds are not guaranteed.
28:51.629 --> 28:53.398
Their values change frequently,
28:53.398 --> 28:54.899
and past performance may or may not
28:54.899 --> 28:56.434
be repeated.
28:56.434 --> 28:57.335
Fees,
28:57.335 --> 28:58.369
expenses, and commissions are all associated with fund
28:58.369 --> 28:58.837
investments.
28:58.837 --> 29:01.106
Thanks for watching and see you next time!
