HEAD-TO-HEAD: Fidelity vs Loomis Sayles

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Investment approach

While both the Fidelity and Loomis Sayles products are US-focused equity funds, both are very different in terms of investment style.

The Fidelity fund focuses on value stocks, while the Loomis Sayles fund concentrates on quality growth stocks, Tysmbaluk said, adding that both funds belong to different Morningstar categories.

The Fidelity product is under the US large-cap value equity category, while the Loomis Sayles fund is classified as a US large-cap growth equity fund.

“The manager of the Fidelity fund seeks very cheap companies and he is anti-momentum,” Tsymabluk said. He looks for companies that have undergone a period of underperformance and he tries to identify the recovery potential.

The Fidelity fund first screens around 3,000 firms using valuation metrics such as price-to-book and price-to-earnings ratios, she said. This leaves the manager 100-200 stocks. He then analyses the companies’ business model, management and capital structure in order to build an upside and downside scenario for each stock.

The fund is relatively concentrated compared to other US equity funds, with just 40-50 names, Tysmbaluk said.

Turning to the Loomis Sayles fund, Tsymbaluk explained that the manager is willing to pay for expensive stocks, but only if the company has strong growth potential and a capable management team.

“They are happy to pay up for growth and quality, but the combination of both is quite rare.”

The manager gauges quality by reviewing competitive advantage, industry analysis, financial analysis and management. For growth, the emphasis is how sustainable profits are in the long-term. These companies tend to have difficult-to-replicate business models and have a strong brand, according to Tsymbaluk.

Like the Fidelity fund, the Loomis Sayles product is also concentrated, with only 35 positions.

The differences in the investment processes are reflected in the sector allocations.

For example, the Fidelity fund has a larger allocation to US financials, which are considered cheap. On the other hand, the Loomis Sayles fund has a huge allocation to technology stocks, which are more expensive.

Sector allocation (%)

Source: Morningstar

Tsymbaluk noted that the Fidelity fund’s investments in technology are in the more value sub-sectors, such as hardware, than in expensive internet stocks.

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