Turning market volatility into a strategic advantage

• When equity markets falter, not every company is affected equally, explains Fidelity’s Jed Weiss. Some businesses operate in segments that are naturally insulated from the crisis at hand, while others – either due to the nature of their operations or market liquidity – may even benefit, potentially making them ideal candidates for investment during periods of uncertainty.
• “Take, for instance, the tariff-induced sell-off in early April due to the U.S. administration’s ‘Liberation Day’ announcements,” says Weiss, who manages Fidelity Advisor^® International Growth Fund. “The art of navigating these near-term challenges can often reveal long-term growth opportunities.”
• As manager of the diversified international equity strategy since 2007, Weiss favors companies with multiyear structural growth prospects, high barriers to entry and an attractive valuation, focusing on cyclically out-of-favor businesses with pricing power and limited competition, as well as firms exhibiting strong earnings potential and a share price that has fallen due to macroeconomic events.
• Amid the early-April volatility, Weiss added exposure to companies whose core businesses tend to be somewhat insulated from the direct impact of tariffs, including RELX, a U.K.-based provider of information and analytics that owns the LexisNexis legal database.
• He also bolstered the fund’s stake in U.S.-based Moody’s, a bond- and credit-rating agency offering services that he considers essential regardless of trade conditions.
• For similar reasons, Weiss recently stepped into elevator companies, adding to the fund’s stakes in Kone and Schindler Holding. “Tariffs or not, people still need to safely and reliably get from one floor to another in tall buildings,” he observes. “These businesses derive a significant portion of their operating profit from legally mandated and highly localized maintenance services, fostering steady demand even amid economic uncertainty.”
• In other areas, Weiss cites British private-equity firm 3i Group, which owns Dutch international discount retailer Action, one of Europe’s fastest-growing operators of discount stores.
• He notes that Action sources many of its goods from China, so if U.S. demand for Chinese products declines, suppliers in China may pivot toward Europe. This shift could reduce costs for European retailers, potentially boosting earnings growth across the region.
• According to Weiss, market stress also can unlock opportunities in smaller firms that, under normal circumstances, can be difficult to trade due to poor liquidity and high valuations.
• To that point, during the tariff-induced pullback, he noticed a sudden increase in trading volume and a drop in prices for several European businesses he had been eyeing.
• “This afforded me the chance to invest in these companies at attractive valuations, including German ticketing and entertainment provider CTS Eventim and U.K.-based miniature wargaming company Games Workshop Group,” says Weiss.
• Volatility does not have to be a cause for panic, he concludes. Instead, it can serve as a catalyst for strategic investment decisions. By focusing on resilient businesses, identifying potential beneficiaries of market shifts, and capitalizing on liquidity events in smaller firms, short-term disruptions could yield long-term investment opportunities.

Securities mentioned were fund investments as of July 31.