Partner Insight: Fidelity Global Special Situations fund manager Jeremy Podger's experience of managing global equities since 1990 means that he has a clear and consistent focus on three types of 'investments' when it comes to allocating stocks for his portfolio.
"My approach is to be as bottom-up driven and valuation disciplined as I possibly can. This is an important part of the strategy because broadly speaking, the fund's global remit provides a wider opportunity set and means I can invest wherever I see potential," explains Podger.
Specifically, Podger looks to combine corporate change with exceptional value opportunities, as well as unique businesses that enjoy a strong competitive position and dominate their respective niche.
The stocks he invests in fall into one of three categories. The first category is defined as corporate change and Podger and his team are looking for substantial and structural change in a business that has the ability to move the overall valuation of the company as well. The second category that underpins the Fund's stock selection process is exceptional value. Here, Podger is willing to take a longer-term stance, investing in companies that are trading on relatively low valuations because profitability is depressed and the market has taken a short-term view of its profit potential. The final category is what Podger defines as "unique businesses or franchises" whereby a company's fundamental ability to grow over time is analysed in detail.
However, as a fund manager, Podger notes he remains very sensitive to high valuations where he believes incrementally bad news could cause sharp drops in valuations.
"[Therefore] I tend to shy away from those companies and have always struggled to justify or understand how to value companies like Amazon. We know it is fair to pay for growth - but we have to keep asking how much is fair to pay for it - but it is important to assess whether such companies can justify their value in terms of the profits they will eventually earn when they are fully mature.
Podger also notes he is "obsessed" with managing risk within the portfolio, and therefore ensuring there is always a level of diversification within the portfolio is key to curb losses during particularly volatile periods.
"Risk control for me is about helping investors to understand that the fund does have some very distinct propositions in terms of the types of investments I select, but these elements work together and add up to a stylistically balanced and flexible portfolio.
"This is a core global equity fund and I'm not running a portfolio with a particular bias to growth, value or income stocks. I manage my risk against the MSCI AC World index. Normally, at least half of overall risk in the portfolio is stock-specific, rather than being systematically derived from a macro theme or a specific style or sector."
Click here to read the full interview and more from Podger on his approach to risk, emerging markets and changing investment cycles.