Fidelity fund manager Jeremy Podger has hailed Tesla (TLSA.O) as a surprise winner in the coronavirus crash, as shares in the electric car maker resume a rocketing rally after its interruption in the stock market sell-off.
Shares in Tesla have more than doubled since falling to $361 in the sell-off, trading at $789 today, with the speed of that climb rivalling the surge to a record $917 in mid-February, before stock markets tumbled as the coronavirus crisis unfolded.
Podger, manager of the £2.2bn Fidelity Global Special Situations fund, is a recent convert to the shares, having first bought them in December last year amid a remarkable bull run. Back-to-back quarterly profits, the start of Chinese production of its Model 3 and launch of its Model Y sports utility vehicle helped lift the shares more than three-fold in four months.
‘We’ve been quite surprised to see that many of the holdings were potentially helped by the current crisis,’ said Podger.
He listed the standouts whose performance had been most ‘helpful’ as T-Mobile US (TMUS.O), which saw its merger with Sprint approved in February, American broadband company Charter Communications (CHTR.O) and Denmark’s Orsted (ORSTED.CO), the world’s biggest developer of offshore wind.
It was Tesla (TSLA.O), however, that was ‘top of the list’, having ‘turned a major corner’ with ‘very exciting prospects’ ahead.
‘We took a number of actions early in the year and accelerated those in the market declines, which I think really mitigated the negative effects,’ said Podger.
‘We’ve seen companies where we think that 2022 could be better than we previously expected, so we’ve tried to use market moves to reinforce those.’
Positioning before crisis hindered
The fund’s 10% loss so far this year is broadly in line with the 10.4% average for funds in the Investment Association’s Global sector. Over three years its 14.9% return is just ahead of the 12.9% average, while over five it has risen 52.5%, versus 37% for the sector.
‘Going into the year our positioning was not particularly helpful,’ said Podger (pictured). Drawbacks as the crisis erupted globally included a 10% overallocation to Europe, compared to global markets, and less in the US.
That was essentially unchanged at the end of March. Podger struck an optimistic tone about the prospect of centralised fiscal stimulus in Europe, while sounding more concerned about US election year uncertainty amid a widening fiscal deficit.
‘Depending on the outcome of that, there is very likely to be a reversal of the tax cuts that helped earnings in the US accelerate a few years ago. So that’s one key consideration,’ he said.
The third of the portfolio in ‘value’ stocks, which Podger said had substantially unperformed in the crisis, was another detractor. That does fit with the balanced style of fund, which has roughly equal baskets invested in undervalued companies, those set to benefit from corporate changes and quality businesses. Podger has, however, rotated slightly towards growth stocks.
Amid the flurry of activity, Fidelity Global Special Situations has bought into nine new companies and sold out of about the same amount. That includes disposals of hard hit but undisclosed stocks in the banking, oil and gas, travel and transport sectors. Shell (RDSB) has fallen out of the fund’s top 10 holdings since the turn of the year.