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Portfolio Manager Insights
Seeking to capitalize on overlooked foreign growth stocks
Narrow international equity markets have presented opportunities to invest in mispriced stocks of companies with compelling growth prospects, says Fidelity’s Bill Bower.
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With investors crowding around a group of high-flying artificial-intelligence-related stocks, Fidelity Portfolio Manager Bill Bower sees opportunity in other international companies with attractive durable-growth potential at a compelling valuation.
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“I believe such underappreciated stocks could be advantageous to Fidelity Advisor® Diversified International Fund in a market with broader stock participation,” says Bower, longtime steward of the broadly diversified international equity strategy. “I’m not just looking for cheap stocks. I want to invest in companies with a differentiated product or other catalyst that could help grow earnings and cash flow over an extended horizon.
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As manager of the fund since 2001, Bower emphasizes high-quality businesses with durable or improving growth prospects that are supported by competitive advantages and are structured for consistent profitability.
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The emergence of AI has been front and center for Bower, with the fund benefiting from exposure to a variety of related names, but recently he has pared some of them when they have reached a valuation that is inconsistent with his approach to risk management, prudently redeploying that capital to other growth companies that he thinks have been overlooked.
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“These new fund investments may not deliver the outsized gains seen in some AI-related companies over the past couple of years,” Bower says, “but I believe they can help me minimize downside capture if the markets stumble, given their more appealing valuation.”
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Within the financials sector – which represented more than 27% of the fund’s assets at the end of January – Bower established a position in U.K.- and Hong Kong-based Prudential and meaningfully increased exposure to Hong Kong-headquartered AIA Group. Both provide insurance, annuities and wealth management services in Southeast Asia. The stocks had derated significantly amid weakness in the local securities market, he says.
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“Southeast Asia is still highly underpenetrated with regard to the insurance and asset-management services these companies provide,” Bower contends. “The population there has a per capita annual income of about $10,000. The region’s population is growing, and over time, as income grows, I believe these undervalued businesses are well-positioned for higher sales and earnings growth in the next three to five years.”
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Elsewhere, Bower has identified attractive opportunities in the semiconductor industry, favoring names such as Renesas Electronics, a Japanese maker of chips for autos, refrigerators and other industrial applications.
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“The stock got incredibly cheap relative to its historical valuation due to depressed business fundamentals, as demand for new cars and appliances slowed in 2025,” he says. “Still, the company has grown earnings and generated cash flow, and as the global economy recovers, I believe sales for the end markets Renesas serves are likely to recover.”
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He contends, “I see Renesas as sort of like a ‘coiled spring’ that may expand at some point, and I’m willing to be patient until that hopefully happens.”
Featured Fund
Fidelity Advisor Diversified International Fund (FDVIX)
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Sector funds can be more volatile because of their narrow concentration in a specific industry. Growth stocks can perform differently from other types of stocks and the market as a whole and can be more volatile than other types of stocks. Value stocks can perform differently than other types of stocks and can continue to be undervalued by the market for long periods of time. • Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. • Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks, all of which are magnified in emerging markets. • In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation, credit, and default risks for both issuers and counterparties. • Lower-quality bonds can be more volatile and have greater risk of default than higher-quality bonds. • Floating-rate loans may not be fully collateralized and therefore may decline significantly in value. • The municipal market is volatile and can be significantly affected by adverse tax, legislative, or political changes, and the financial condition of the issuers of municipal securities. • The securities of smaller, less well-known companies can be more volatile than those of larger companies. • The funds can invest in securities that may have a leveraging effect (such as derivatives and forward-settling securities) that may increase market exposure, magnify investment risks, and cause losses to be realized more quickly. • Leverage can magnify the impact of adverse issuer, political, regulatory, market, or economic developments on a company. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders. Although the companies that the fund invests in may be highly leveraged, the fund itself does not use leverage as an investment strategy. Changes in real estate values or economic downturns can have a significant negative effect on issuers in the real estate industry. In the event of bankruptcy, a company’s creditors take precedence over the company’s stockholders. Third-party marks are the property of their respective owners; all other marks are the property of FMR LLC.
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