The Upside: Fund feature: Unpacking Fidelity North American Equity Class

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Hello, and welcome to The Upside fund feature.

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I'm Helen Pang. I'm here today with Madeline Kaminsky.

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She's an investment associate on the product research team here at Fidelity

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covering Fidelity North American Equity class, which we're very excited to be

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looking into today. Welcome back, Maddie. So good to see you again.

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You too. Thank you so much for having me, Helen.

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Fidelity North American Equity Class recently celebrated its 10-year

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anniversary and was awarded a Lipper Award for the best North American equity

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fund over five years. This is the fund's fifth consecutive year winning a

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Lipper Award, a testament to its consistently strong risk-adjusted performance

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relative to peers. We have lots to talk about today, Maddie.

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Can you start off by giving us an overview of the fund and how it came to be?

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Fidelity North American Equity class managed by portfolio manager Darren

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Lekkerkerker is a leader in the North American equity category in which Darren

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is able to own the best ideas that he has across the U.S.

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and Canada. The fund can be best characterized as a U.

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S. equity fund with the best opportunities that Darren identifies across

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Canada and the flexibility for him to invest where he identifies the

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greatest opportunity.

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Darren is a seasoned portfolio manager with additional responsibilities

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managing Fidelity Global Natural Resources Fund and the equity sub-portfolios

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of Fidelity Canadian Asset Allocation Fund, Fidelity Canadian Balanced

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Fund and Fidelity Inflation-Focused Fund.

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Back before Fidelity North American Equity Class was launched in 2015

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investors were advocating for a standalone fund from Darren.

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They were impressed by the performance of his other mandates so a standalone

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fund was a natural next step.

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It does feel like it was just yesterday. I think what happened was I wanted to

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have a standalone fund.

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I was excited to have a broader mandate that not only included

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Canada but also focused on the U.S.

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At that point U.

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S. was doing well, the outlook for the U S.

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was really strong.

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Clearly, U.S. has done really well for the past 10 years and it's benefited

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the fund. The structure of the fund is 70

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U.S. and 30  Canadian but there's a lot of flexibility.

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It can go to zero Canada or 50% Canada with the balance being U.S.

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I can add some global in there as well.

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I wanted to have a broader mandate. I thought focusing on the U.S.

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would result in better absolute performance.

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I think just given the U.S.

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has a higher focus on technology, health care,

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consumer, I thought that there'd be more secular growth and more innovative

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companies that would help me not only in picking for that fund but also picking

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for my Canadian stocks as well.

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Look, I'm competitive, I want to win, I want to do a great job for the

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people that put enough faith in me to buy this fund

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or buy this fund for their clients.

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I'm glad that we achieved a really positive outcome.

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Fidelity North American Equity Class has experienced strong absolute and

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relative performance since its inception in late October of 2015.

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Over the 10-year period ending November 30, 2025, the fund

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returned 14.6%, outperforming its benchmark and beating

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95% of peers in the North American equity category.

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At a medium risk rating Darren aims to achieve long term capital growth

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by investing in high quality equity securities across North America.

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One of the things Darren often refers to is the ownership mindset that

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he employs to investing.

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Can you tell us a bit about what that means?

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Taht's a great question, Helen. Throughout Darren's experience in the industry

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he has developed what he defines as an ownership mindset.

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What this means is that Darren considers each investment as taking an ownership

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stake in the business not as a short-term trade.

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When he holds a stock in his portfolio he's buying into the business and

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indirectly hiring the management team of the company to grow the company and

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act in the shareholder's best interest.

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Due to this he takes a prudent approach to evaluating each business before

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investing.

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Darren emphasizes the importance of attending as many company meetings as he

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can as part of this process, an approach he learned from Will Danoff.

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He stresses the importance of doing so as meeting a management team

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face-to-face allows him to gain a more comprehensive understanding

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of a business and assess the strength of its management team.

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I like to invest in high quality companies.

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Number one, I focus on the quality of the business.

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Is this a great business, does it have a competitive moat, is it

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gonna be durable or can it expand over time?

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Management team, everyone says they like good management, what does that mean?

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One, we interview them as part of the process and we do so regularly.

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Two, does management own ...

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how much skin do they have in the game? Do they own a lot of shares?

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How much shares do they own versus what they get paid.

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I want them to go home and think about increasing the share price not

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increasing their annual comp.

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Then two, capital allocation.

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How has management done at capital allocation, what do they plan to do?

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We want them focus on doing the highest risk-return adjusted

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thing for capital allocation, which is investing the excess free cash flow of

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the company whether that's in M&A or share buybacks

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or higher dividends.

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Then three, valuation.

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Price you pay is important and it has a big determinant on the return going

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forward. Having said that, I prefer a wonderful business at a

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reasonable price than a reasonable business at a wonderful price.

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Darren has mentioned that he feels optimistic with the current economic outlook

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for next year. Can you share where he's currently finding opportunities for

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this fund?

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While optimistic on the current macroeconomic outlook Darren remains focused

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on ideas driven by bottom-up fundamentals.

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He emphasizes the importance of selecting the right manager over making a

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macro call in order to maximize long term performance.

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I'm not a macro person, I always have a macro opinion, and I think

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that if I do it takes time away from researching

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individual companies which can really drive the results of the fund.

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I also think that over the past 10 years if you were

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very macro invested you probably would have been more conservative or defensive

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and that probably would have a big headwind for returns because, obviously, the

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past ten years have been pretty strong in the stock market.

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Darren believes North America offers particularly strong investment

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prospects due to its robust innovation pipeline, favourable

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demographics and resource self-sufficiency.

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Darren continues to emphasize the importance of understanding what you own and

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focusing on higher quality companies.

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Within the fund Darren has been finding opportunities within the consumer

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discretionary and communication services sectors reflected in his

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overweight positions in each.

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The multi-national Canadian clothing retailer Aritzia, a top 10

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position in the fund as of September 30th, 2025, is a

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holding Darren added during tariff volatility earlier in the year.

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He believed the firm presented a compelling investment opportunity due to the

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company's strong brand momentum and successful expansion into the U.S.

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market. The firm saw strong recovery following Liberation

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Day as improvements in tariff sentiment propelled the firm's stock

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price upwards and the outlook for imports improved,

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contributing to strong investment results for the fund.

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Darren has also been finding attractive opportunities among communication

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services companies such as Netflix, another top 10 position

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in the portfolio.

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Netflix has found success recently due to its strong pricing power in the

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industry and expansion into other streaming services such as [indecipherable].

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I think the economy looks stable,

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I think it looks decent. I think the AI trade at

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the moment looks strong. So far company earnings in the third quarter have been

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really strong, stronger than the second quarter which was stronger than

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expected. Companies are very profitable and in a good shape.

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I think it's a decent outlook that we have here.

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I'm optimistic and continuing to look for the best companies.

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