Portfolio Manager Insights

From frenzied speculation toward steadier ground in small-cap banks

Fidelity’s Jennifer Fo Cardillo believes small-cap banks may offer a compelling alternative to the high-flying, high-risk investments grabbing headlines.

By: Jennifer Fo Cardillo
Updated: 5/18/2026
  • Fidelity Portfolio Manager Jennifer Fo Cardillo is constructive on high-quality small-cap banks that she believes offer stability, competitive advantages and attractive valuations. She views the category as a compelling, lower-risk alternative to other small-cap segments characterized by elevated valuations, uncertain revenue and largely unproven business models.
  • “When speculative stocks dominate the market, as has been the case in the historic small-cap rally that began on April 8, 2025, I believe the importance of value-oriented investing cannot be overstated,” says Fo Cardillo, who co-manages Fidelity Advisor® Stock Selector Small Cap Fund, alongside Shadman Riaz, Patrick Venanzi and Eirene Kontopoulos. Over time, high-quality businesses should return to favor, and I believe banking stocks are well-positioned to benefit.”
  • In overseeing the diversified small-cap core strategy, Fo Cardillo favors firms with competitive differentiation, the ability to fund operations with stable, high-quality free cash flow, and a trustworthy management team, while avoiding businesses with poor earnings quality, stretched balance sheets and unreasonable valuations.
  • Since the equity market bottom in April 2025, the surge in speculative industries – including nuclear and quantum computing, as well as electric aircraft – has been nothing short of remarkable, according to Fo Cardillo. “These businesses may hold promise for the future, but their ability to generate meaningful revenue likely remains years away, in my view,” she says.
  • Fidelity’s small-cap team finds that valuations for low-quality small-caps echo the exuberant markets of 1999 and 2021.
  • “The past suggests that no market cycle lasts forever,” Fo Cardillo points out. “When the tide turns, attractively valued stocks that have been overlooked often come into focus, which is why I’ve been adding to some value-oriented holdings – high-quality banks in particular – that I believe should be well-positioned if history repeats.”
  • Several lenders, in Fo Cardillo’s view, fit this description, supported by their strong underwriting track records and low credit risk. She believes fixed asset repricing should support net interest margins, bolstering profitability and providing greater flexibility for banks to deploy excess capital under the current administration’s more accommodative regulatory framework.
  • Fo Cardillo notes several banks that align with her investment philosophy, including First Bancorp, CVB Financial and First Hawaiian – fund holdings as of February 28, 2026.
  • First Bancorp is a regional bank headquartered in the attractive and dynamic North Carolina market, which she believes positions it well to take market share.
  • Fo Cardillo favors CVB Financial for its industry-leading credit history and what she views as an opportunity to effectively deploy capital, while First Hawaiian Bank – the second-largest competitor in a highly concentrated market dominated by just a few players – should see a tailwind from increased defense spending.
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