Fidelity Trend Fund MARKET RECAP. Key Takeaways

Transcription

1 Fidelity Trend Fund Key Takeaways For the semiannual reporting period ending June 30, 2017, the fund gained 14.20%, outperforming the 13.99% return of the benchmark Russell 1000 Growth Index. Portfolio Manager Dan Kelley was pleased the fund kept up with the benchmark the past six months, given his focus on "mispriced earnings growth" in an environment that favored stocks with the strongest revenue growth, regardless of price. Security selection in the consumer discretionary and information technology sectors especially helped performance versus the benchmark, while an overweighting in energy and stock picks in materials and industrials detracted. An overweighting in Tesla stood out, as the fund's holdings gained 71% for the six-month period, buoyed by mounting confidence that the maker of electric autos would meet expectations for its new mass-market Model 3. Looking ahead, Dan is optimistic that improved U.S. economic growth will help more-economically sensitive sectors, including financials and materials, the fund's biggest overweightings at period end. MARKET RECAP The U.S. equity bellwether S&P 500 index returned 9.34% for the six months ending June 30, 2017, gaining strongly to begin the new year on optimism for President Trump's probusiness agenda. Equity markets leveled off in March, however, as the fledgling administration faced the first test of its domestic agenda. The index reacted with uncertainty to efforts by Congress to repeal and replace the Affordable Care Act (ACA) and then turned upward through June 30. In a stark reversal from 2016, growthoriented stocks handily topped their value counterparts for the first half of Among sectors, information technology (+17%) fared best, surging as a handful of major index constituents posted stellar returns. Health care (+16%) was close behind, climbing in February and again in the second quarter, following the ACA's reprieve. Meanwhile, consumer staples (+8%) and utilities (+9%) fell just shy of the broader market amid investors' general preference for risk assets. Financials (+7%) lagged because sentiment regarding the potential for deregulation and lower taxes faded as the White House turned its attention to other initiatives. Rising interest rates hurt real estate (+6%) and dividend-rich telecommunication services (-11%), the latter of which was further hampered by increased competition. Lastly, lower oil prices sent energy (-13%) to the bottom of the sector performance rankings. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Portfolio Manager Daniel Kelley Fund Facts Trading Symbol: Daniel Kelley Portfolio Manager FTRNX Start Date: June 16, 1958 Size (in millions): $1, Investment Approach Fidelity Trend Fund is a diversified domestic equity strategy with a large-cap growth bias. Our investment approach focuses on companies with a rate of growth that we believe has been mispriced by the market. We believe investors have a tendency to overextrapolate recent trends, which can cause equity prices to disconnect from their underlying fair values, creating investment opportunities. Our extensive use of both fundamental and quantitative analysis helps us to screen for stocks that seem mispriced relative to their long-term earnings-growth potential. We emphasize valuation in our investment process and pursue undervalued stocks with improving fundamentals, which we believe may offer a higher probability of future relative outperformance. Q: Dan, how did the fund perform for the semiannual reporting period ending June 30, 2017 The fund gained 14.20%, outperforming the 13.99% return of the benchmark Russell 1000 Growth Index, and also topping the peer group average. The relative performance story was similar for the past year, as the fund beat both the benchmark and peer group average. Looking at the first half of 2017, I am pleasantly surprised that my strategy of looking for "mispriced earnings growth" worked as well as it did. I consider myself a bit different from many growth fund managers who focus on stocks with the fastest (or highest) absolute rate of earnings growth, without as much regard for valuation. I try to find stocks that seem attractively priced relative to their earnings-growth prospects a few years out. My hope is that I'll get paid twice: once when upward earnings revisions push the stock price higher, and again as more investors become willing to pay up for an improving business. The market's big "winners" this period were companies with the fastest revenue growth, particularly some well-known information technology companies. Some growth funds had 50% of their assets in tech, but that's not my M.O. I like to spread assets across sectors to give the fund some degree of protection in the event of a market rotation. Our allocation to tech this period was about 32%, on average, just a bit below that of the benchmark. In addition, we had overweightings in more-economically sensitive sectors that underperformed, including energy, materials and industrials. Despite these allocation decisions detracting, the fund topped its benchmark. Q: What gave the biggest boost to performance versus the benchmark the past six months In terms of sectors, my picks in consumer discretionary helped most, followed by tech. Most of our top individual contributors were what I call "secular growth" stocks companies with high and sustainable revenue- or earningsgrowth rates, often driven by a unique technology, a product that's in high demand or a growing trend. 2 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

3 Tesla was by far our biggest relative contributor and one of our secular-growth stories in the consumer discretionary sector. Last January, I visited the company's new Gigafactory, which produces lithium ion batteries for the company's electric cars. At the time, the stock was being held back by concern about whether or not the company could deliver its new mass-market Model 3 car on time and at scale. Plus, investors worried about whether the gross margin would be acceptable. By touring the factory, I could see a path for aggressively lowering the battery's cost to a level where Tesla could get a decent gross margin on the car. I also saw a working Model 3, which made me believe the company could hit its late-july target for its first deliveries. The new car is simpler than previous models, which we believe should eliminate some manufacturing issues. Given these factors, I thought Tesla's earnings could grow faster for longer than the market appreciated. Our overweighted stake in Tesla rose 71% the past six months amid growing signs the company would meet its targets. I locked in some profits by reducing our position, but remained comfortably overweighted as of June 30. Q: Which other stocks helped Another secular-growth story in consumer discretionary was JD.com, a Chinese e-commerce firm and nonbenchmark holding. I thought JD seemed much cheaper than some U.S. internet companies and also had a better earnings-growth outlook. Plus, in my opinion, JD's sizable cloud-computing business wasn't being factored into the stock price. The company has been investing heavily to grow the business, and I expected that would start to pay off. JD produced its first positive earnings quarter this year, helping to drive a roughly 55% gain for our stake. Not owning telecommunication services provider Verizon also was a good call. Growing wireless competition is forcing prices down, which is never good for earnings. The stock returned about -14% for the period. Elsewhere, we benefited from our overweighting in Vertex Pharmaceuticals, as the stock rose 74% for the fund this period. Because investors were skeptical about whether new cystic fibrosis treatments in the company's pipeline would be successful, the stock price wasn't factoring in much upside potential. Our research suggested that investors were underestimating or overlooking the earnings potential of these new drugs, creating what I saw as an opportunity to buy mispriced earnings growth. I was pleased when Vertex's stock took off in late March, following the release of encouraging data for one of the drugs it has in development. Q: What could you tell us about detractors Our overweighting in energy, the weakest sector in the benchmark, did the most damage, followed by stock picks in materials and industrials. Energy stocks fell this period, as concerns about oversupply caused oil prices to pull back and as President Trump's plan to enact new progrowth initiatives underwhelmed. Our biggest individual detractor was a non-benchmark stake in exploration and production company Anadarko Petroleum. The stock seemed to be reflecting a lower-for-longer oil price than I thought was likely. However, added pressure came from a bigger-than-expected first-quarter loss, a fatal home explosion in Colorado tied to one of its wells, and a disappointing appraisal for a well in the Gulf of Mexico. All of this prompted me to reduce our position in Anadarko. Many of our biggest disappointments, including Anadarko, were "opportunistic growth" stocks, which, in aggregate, made up about 20% of the fund at period end. This bucket consists of stocks that I think are cheap but near an upward inflection point. Other detractors here included biotechnology company Alexion Pharmaceuticals, which saw its shares fall sharply following recent management turnover and an investigation into the company's sales practices for its key drug, Soliris, which treats two rare blood disorders. I roughly halved our stake in Alexion because my confidence in near-term earnings estimates went down materially. However, the recent appointments of a new CEO and CFO may be positive signs. Lastly, it hurt to hold a non-benchmark stake in fertilizer maker and distributor CF Industries Holdings, as continued weakness in urea pricing and the agricultural market weighed on the stock. I reduced our stake but continued to hold CF because of my view that, if demand were to rise, industry capacity constraints would benefit the stock. Q: What's your period-end outlook, and how is the fund positioned, Dan My outlook hasn't changed much. While President Trump's ability to enact pro-growth legislation has been disappointing, I still feel good about the health of the U.S. economy. Stock prices are not reflecting inflation concerns. Interest rates and unemployment are low, asset prices are rising globally and consumer confidence is high. Our biggest area of investment about 45% of assets at period end is still "quality growth," large, well-known companies with proven management teams, high returns on capital, strong balance sheets and attractive stock prices relative to stable or accelerating earnings growth. Our largest sector overweightings at period end are financials, materials and health care. 3 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

4 LARGEST CONTRIBUTORS VS. BENCHMARK Dan Kelley on why he pays attention to balance sheets: "I think investors are not appreciating companies with a strong balance sheet or a lot of cash because cash is not earning any real return in the current low interest rate environment. "However, businesses with a strong balance sheet have a lot of options to grow earnings. They can borrow at attractive rates. They can use their cash to invest in growing the business or to buy other assets that could have decent returns. Plus, a strong balance sheet is a big advantage if and when capital ever becomes more difficult to access. I would expect companies with huge cash 'war chests' to hold up better than more-levered names in a financial crunch or market downturn. "I look closely at balance sheets as part of my evaluation of companies. The fund's four biggest holdings as of June 30 Apple, Alphabet, Amazon.com and Facebook not only have fast earnings growth, but also great balance sheets. "Another fund holding with a strong balance sheet is luxury leather goods company Coach. For some time, investors were skeptical about the firm's sales and earnings prospects, given pressure in the retail industry. However, Coach had little debt on its balance sheet. It later sold its Manhattan headquarters, which led to a net cash balance. "I didn't think investors appreciated what all this cash could do for Coach. This past spring, it announced plans to buy competitor Kate Spade for $2.4 billion. The firm says it expects the acquisition to be accretive, giving Coach more access to millennials, opportunities to expand overseas and cost synergies. The news, along with better-than-expected first-quarter profits, drove a roughly 37% return for Coach shares in the first six months of 2017." Holding Tesla, Inc. Verizon Communications, Inc. JD.com, Inc. sponsored ADR Vertex Pharmaceuticals, Inc. Alibaba Group Holding Ltd. sponsored ADR * 1 basis point = 0.01%. Market Segment Consumer Discretionary Telecommunicatio n Services Consumer Discretionary Average Relative Relative Contribution (basis points)* 1.68% % % 28 Health Care 0.49% 24 LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment 0.57% 21 Average Relative Relative Contribution (basis points)* Anadarko Petroleum Corp. Energy 0.68% -40 Alexion Pharmaceuticals, Inc. CF Industries Holdings, Inc. Health Care 1.18% -32 Materials 0.68% -30 Fluor Corp. Industrials 0.83% -28 Flowserve Corp. Industrials 1.26% -25 * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Portfolio Portfolio Six Months Ago Domestic Equities 92.61% 95.34% International Equities 7.03% 4.54% Developed Markets 3.70% 3.43% Emerging Markets 3.33% 1.11% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 0.36% 0.12% Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number. "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. 4 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

5 MARKET-SEGMENT DIVERSIFICATION 10 LARGEST HOLDINGS Market Segment Portfolio Portfolio Six Months Ago 36.97% 29.09% Consumer Discretionary 16.74% 17.20% Health Care 15.46% 13.72% Industrials 9.09% 12.14% Financials 8.01% 10.59% Materials 6.09% 6.44% Consumer Staples 4.75% 5.16% Energy 1.20% 3.53% Real Estate 0.98% 1.04% Telecommunication Services 0.35% 0.86% Utilities 0.00% 0.11% Other 0.00% 0.00% Holding Apple, Inc. Alphabet, Inc. Class A Amazon.com, Inc. Facebook, Inc. Class A Market Segment Consumer Discretionary Portfolio Portfolio Six Months Ago 7.13% 6.03% 7.02% 5.11% 4.93% 3.64% 4.08% 2.93% Amgen, Inc. Health Care 2.76% 1.20% PayPal Holdings, Inc. Microsoft Corp. Visa, Inc. Class A Charter Communications, Inc. Class A Consumer Discretionary 2.60% 0.25% 1.96% 2.73% 1.77% 1.66% 1.68% 1.90% Bank of America Corp. Financials 1.68% 2.82% 10 Largest Holdings as a % of Net Assets 35.60% 30.59% Total Number of Holdings The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. Holdings do not include money market investments. FISCAL PERFORMANCE SUMMARY: Periods ending June 30, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Trend Fund Gross Expense Ratio: 0.74% % 14.20% 21.26% 10.07% 15.30% 9.11% Russell 1000 Growth Index 13.99% 13.99% 20.42% 11.11% 15.30% 8.91% S&P 500/Russell 1000 Growth 13.99% 13.99% 20.42% 11.11% 15.30% 8.91% Morningstar Fund Large Growth 14.14% 14.14% 20.02% 8.80% 13.87% 7.51% % Rank in Morningstar Category (1% = Best) % 32% 21% 15% # of Funds in Morningstar Category ,424 1,277 1, Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/16/ This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, advisor.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. Please see the last page(s) of this Q&A document for most-recent calendarquarter performance. 5 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

6 Definitions and Important FUND RISKS Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. Growth stocks can perform differently from the market as a whole and can be more volatile than other types of stocks. IMPORTANT FUND INFORMATION Relative positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance. Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. reinvested dividends and capital gains, if any, and exclude sales charges. RELATIVE WEIGHTS Relative weights represents the % of fund assets in a particular market segment, asset class or credit quality relative to the benchmark. A positive number represents an overweight, and a negative number is an underweight. The fund's benchmark is listed immediately under the fund name in the Performance Summary. INDICES It is not possible to invest directly in an index. All indices represented are unmanaged. All indices include reinvestment of dividends and interest income unless otherwise noted. Russell 1000 Growth Index is a market-capitalization-weighted index designed to measure the performance of the large-cap growth segment of the U.S. equity market. It includes those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth rates. S&P 500/Russell 1000 Growth Index represents the performance of the Russell 1000 Growth Index since February 1, 2007, and the S&P 500 Index prior to that date. S&P 500 is a market-capitalization-weighted index of 500 common stocks chosen for market size, liquidity and industry group representation to represent U.S. equity performance. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2017 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses. % Rank in Morningstar Category is the fund's total-return percentile rank relative to all funds that have the same Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The top-performing fund in a category will always receive a rank of 1%. % Rank in Morningstar Category is based on total returns which include 6

7 Manager Facts Daniel Kelley is a portfolio manager at Fidelity Management & Research Company (FMR Co.), the investment advisor for Fidelity's family of mutual funds. Fidelity Investments is a leading provider of investment management, retirement planning, portfolio guidance, brokerage, benefits outsourcing and other financial products and services to more than 20 million individuals, institutions and financial intermediaries. In this role, Mr. Kelley manages Fidelity Trend Fund. Additionally, he co-manages Fidelity Advisor Diversified Stock Fund and Fidelity Advisor World Funds Diversified Stock Fund. Previously, Mr. Kelley managed Fidelity Large Cap Growth Fund, Fidelity Advisor Strategic Growth Fund, and Fidelity VIP Growth Stock Portfolio. He also managed Fidelity Select Construction and Housing Portfolio. Prior to assuming his management responsibilities, Mr. Kelley worked as a research analyst responsible for the coverage of real estate investment trusts (REITs) and homebuilders stocks. Before joining Fidelity in 2005, Mr. Kelley was an associate in the Institutional Equities division at Morgan Stanley. He was also a financial analyst, and later an associate, in the Equities division at Goldman Sachs & Co. He has been in the investments industry since Mr. Kelley earned his bachelor of science degree, summa cum laude, in finance and accounting from Georgetown University. 7 For definitions, fund risks and other important information, please see the Definitions and Important section of this Q&A.

8 PERFORMANCE SUMMARY: Quarter ending September 30, Annualized 5 10 / LOF 1 Fidelity Trend Fund Gross Expense Ratio: 0.74% % 11.88% 14.99% 8.99% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/16/ This expense ratio is from the prospectus in effect as of the date shown above and generally is based on amounts incurred during that fiscal year. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, institutional.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Past performance is no guarantee of future results. Views expressed are through the end of the period stated and do not necessarily represent the views of Fidelity. Views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. The securities mentioned are not necessarily holdings invested in by the portfolio manager(s) or FMR LLC. References to specific company securities should not be construed as recommendations or investment advice. included on this page is as of the most recent calendar quarter. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee Diversification does not ensure a profit or guarantee against a loss.