The Upside: Funds in focus – Hugo Lavallée's contrarian strategies

[00:00:01] Helen Pang: Hello, and welcome to the Upside Fund feature. I'm Helen Pang. I'm here today with Marianne Lando. Marianne is an investment analyst on the product research team here at Fidelity. She covers the Greater Canada Fund which we'll be looking at today. Hi, Marianne.

[00:00:14] Marianne Lando: Hi, Helen. Thanks for having me.

[00:00:16] Helen Pang: The Greater Canada Fund is managed by portfolio manager Hugo Lavallée. He has 23 years of industry experience and also manages the Fidelity Canadian Opportunities Fund, Fidelity Climate Leadership Fund, and is a subportfolio manager on Fidelity Global Equity+ Fund. Now Hugo is a contrarian investor and he seeks out-of-favour stocks. Can you tell us a bit about what that means strategically?

[00:00:39] Marianne Lando: Investors can essentially take two paths to regenerating returns. The first is betting on change, finding companies that will thrive because their future looks fundamentally different from their past. Nvidia is a prime example, transitioning from a gaming and crypto company to a leader in AI and data centres. The second is centred on continuity, by identifying solid businesses facing temporary headwinds with the conviction that their future will once again resemble their strong past. Hugo's contrarian style leans towards the latter, looking beyond short term challenges to uncover potential long term opportunities. In today's momentum-driven market where capital flows towards expensive winners Hugo invests against prevailing market sentiment, seeking quality companies with temporary compressed margins rather than chasing crowded trades. Hugo often references Napoleon's principle of doing the ordinary during extraordinary times to describe his contrarian approach.

[00:01:36] That approach was clear during Liberation Day. When most fled to defensive sectors and cash surged Hugo deployed capital into long term favourite names offering attractive balance sheets and strong liquidity. One such example is Shopify, a high quality Canadian e-commerce platform whose stock fell on tariff related fears but with the potential for higher takeaway rates and meaningful margin expansions. He saw long term upside despite near term volatility.

[00:02:06] Hugo Lavallée: We did have one contrarian moment this year, it lasted about four days.  Liberation Day. That was good. We're very active and I think that's where I'm at my best, frankly. Napoleon had a quote which was activité activité vitesse. Basically you're working all the time, and Michael spoke about it a little bit earlier, you work all the time so then when something happens you're ready. It's not like I'm opening the Aritzia now report and like, oh, what did they do? You've done a lot of work ahead of time and you're ready. You're ready to beat your ... encircle your enemies or ski to the puck, whatever analogy you want to use, before the competition but you're ready. Two, it's a mental mindset not to be scared. A lot of people get scared in those moments. That's one thing I'm good at.

[00:03:01] This year Canada's starting to outperform. I think there's something happening there.  I think it's important that we pay attention to the signal that the market's sending us. Basically, I think Fidelity Canada, we've done a good job the previous 10 years, and I'm talking about the Canadian PMs. We've done a good job buying great companies, good companies. What we've noticed is their multiples have risen and risen and risen. They've got more and more and more expensive.

[00:03:34] Helen Pang: As of the end of November Fidelity Greater Canada Fund Series F has an annualized return of 15.1% since Hugo took over portfolio management responsibilities of the fund in October 2011. We know the fund has earned some awards and have been recognized for its ability to earn strong risk-adjusted returns over the long term. Can you tell us a bit more about that?

[00:03:55] Marianne Lando: 4-star rated by Morningstar as of October 2025 Fidelity Greater Canada Fund is a 2024 Fund Grade A+ Award winner and has earned a total of six Fund Grade A+ Awards and five Lipper Awards for its strong risk-adjusted returns over the long term. Last month Northstar highlighted portfolio manager Hugo Lavallée for his proven contrarian approach and long term performance, underscoring the benefits for investors who stay committed through market cycles. Patience is critical to contrarian investing. Hugo's success lies in the preparation, leveraging Fidelity's global research network to identify opportunities before volatility hits. With a curated watch list of high quality companies he acts decisively when others hesitate, staying ahead of the tide and setting the pace for competitors, turning market dislocations into long term advantages.

[00:04:46] Helen Pang: Let's talk a bit more about sectors. What sectors is Hugo focusing on now, and what are his reasonings behind it? Why are they attractive in today's environment?

[00:04:54] Marianne Lando: Hugo is looking beyond the crowded space of expensive market leaders, focusing on old economy themes in gold, North American transportation and Canadian financials, positioned for recovery. Margins temporarily compressed relative to 20-year historical levels creating attractive entry points. Gold is supported by expectations for monetary easing and yield curve control in 2026, reinforcing its role as a hedge against uncertainty. Record highs and mine expansions and drilling opportunities strengthen the case. Transportation offers compelling value after years of contraction. With U.S. manufacturing signalling weakness and deeply discounted valuations tighter driver supply sets a stage for pricing power once demand rebounds. Canadian financials also stands out backed by improving rate dynamics, potential fiscal stimulus and global commodity strength, favouring banks with international exposure. Portfolio manager Hugo Lavallée's contrarian approach turns volatility into opportunity, investing ahead of the recovery through preparation, patience and a commitment to quality.

[00:06:02] Hugo Lavallée: Simplistically, there's two ways to make money in the stock market. The future will be different than the past. The future will be like the past. I think old economy stocks are more interesting. We have to retrain a whole almost generation of analysts. We have analysts that only know a couple of things. U.S. always outperforms, growth always outperforms and it doesn't matter what you pay for a stock, multiples always expand. Now when you look at relative value I think a lot of it is into older economy things that Canada does. We're looking at, say, free cash flow yield on some of the miners, and at $4,000 gold they're almost 20%. $5,000 gold, they're almost 30% for some of the companies. You can buy a driller that does exploration for the miners and it might be less than 10 times earnings. You can buy a copper gold porphyry at 7, 8 times earnings. As people are chasing other things that's what I'm trying to focus on. I'm trying to focus on older school economy. The reason for that, why it's working and why the world's changing is financial repression. We cover them but we didn't go to any conferences for these companies. That's not where the action was. Now we're going back to these conferences. December, I'm going to a mining conference. January, I'm going to another mining conference and everything related. It's so bizarre to revisit those companies. Sometimes it's the same people so it's a little awkward. It kind of sounds familiar. I call it it's like getting back with your ex. It's weird, it feels wrong, yet you're doing it. Feels a little dangerous, it's definitely awkward. Hey, I'm back, haven't spoken to you in 10 years, you know, to your old in-laws. We're doing it and the whole team is on it, and that I'm quite proud about it.

[00:08:15] Helen Pang: That's all for today's show. Please follow us on our socials including Instagram, YouTube, LinkedIn, Facebook and Reddit for more great content and the latest financial updates. You can also head to fidelity.ca's investor education section to check out our articles, sign up for The Upside newsletter, get information about upcoming live webcasts and on-demand videos. Whether you're learning investment basics or looking for more advanced knowledge we can help you become a more informed investor. As always, working with a financial advisor is among the best investments you can make. Thanks for watching and I hope you'll join us again on The Upside.