Fidelity Large Cap Stock Fund

Transcription

1 Fidelity Large Cap Stock Fund Key Takeaways For the semiannual reporting period ending October 31, 2017, the fund gained 6.85%, significantly trailing the 9.10% advance of the benchmark S&P 500 index. The fund's underperformance of the benchmark the past six months was shaped by a market environment that favored highly priced growth stocks, a headwind for Manager Matt Fruhan's valuation-conscious strategy. Stock picking in the health care sector, especially among pharmaceutical-related stocks, was the biggest relative detractor. Stock picks in industrials also hurt, as did a combination of weak security selection and below-benchmark exposure to the marketleading information technology sector. Notable relative contributors included security selection in financials, as well as a very large overweight in this strongperforming category. As of October 31, the fund remained significantly overweight in the financials and energy sectors, where Matt continued to see longer-term opportunities. Meanwhile, the fund remained underweight in the information technology and consumer discretionary sectors, particularly certain high-priced stocks Matt viewed as beneficiaries of intense investor interest. MARKET RECAP The U.S. equity bellwether S&P 500 index returned 9.10% for the six months ending October 31, Markets notched strong gains, and the index hit a series of all-time highs late in the period. With exception of a brief cooldown in August, when geopolitical tension escalated and uncertainty grew regarding legislation out of Washington, consumer sentiment and other market indicators remained positive. In a stark reversal from 2016, growth-oriented stocks handily topped their value counterparts. Among sectors, information technology (+19%) was a standout, surging as a handful of major index constituents, notably in the semiconductor group (+30%) within the index, posted strong returns. Financials gained 14%, riding the uptick in bond yields and a surge in banks late in the period. Materials (+12%) also did well, spurred by increased demand, especially from China. Conversely, rising interest rates held back real estate (+4%), while sluggish oil prices dragged on energy (+2%) and weak media shares (-10%) curbed what was an otherwise decent period for consumer discretionary (+3%). Ending in negative territory, consumer staples (-2%) and telecommunication services (-5%) struggled due to investors' general preference for risk assets, coupled with increased competition. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Manager Matthew Fruhan Fund Facts Trading Symbol: Matt Fruhan Manager FLCSX Start Date: June 22, 1995 Size (in millions): $5, Investment Approach Fidelity Large Cap Stock Fund is a diversified domestic equity strategy with a large-cap core orientation. Our investment approach is to find companies that we believe have attractive earnings and dividend yield potential over the next two to three years, and where our view is different than market consensus. We believe securities can become mispriced relative to their true long-term value when investors become increasingly focused on the short term, and our process seeks to exploit these discrepancies to drive performance. We strive to uncover these companies through in-depth bottom-up, fundamental analysis, working in concert with Fidelity's global research team. Q: Matt, how did the fund perform for the six months ending October 31, 2017 In a strong market environment for stocks, the fund gained 6.85%. This result significantly trailed the 9.10% advance of the benchmark S&P 500 index, as well as the peer group average. The fund's underperformance of the benchmark was mostly due to subpar stock picking in the health care sector, especially among pharmaceutical-related names. Security selection in industrials also hurt our relative result, as did a combination of weak picks and underexposure to the market-leading information technology sector. On the positive side, the fund continued to be well-positioned in financials. Security selection in this outperforming group added value, as did my longstanding overweight. Looking out a bit longer term, which is more consistent with my overall approach to portfolio management, the fund lagged the benchmark and peer group average for the trailing 12 months, though to a slightly lesser extent. Q: What factors made it a challenging sixmonth stretch for your strategy The market environment continued to favor highly priced growth stocks, especially a narrow slice of what I considered increasingly expensive technology and consumer discretionary names. This situation resulted in a somewhat difficult environment for me and my valuationconscious strategy. No matter market conditions, I regularly use the same disciplined approach to managing the fund: I find that the market sometimes overreacts to changes in short-term earnings estimates, leading securities to become mispriced relative to their long-term intrinsic (true) value. I believe that by combining deep investment research with patience and discipline, an investor has the opportunity to take advantage of this market inefficiency. At the same time, I will sell or avoid stocks with valuations that appear too high in relation to the companies' future earnings potential. Such close attention to what I consider underappreciated long-term earnings power, as well as 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 valuation, is critical to my philosophy and process, and also key to my approach to risk management. Stocks may outperform or underperform at different points in a given market cycle, but paying close attention to the valuations of stocks with durable earnings power has tended to be helpful to fund performance over longer stretches. Q: Where were you investing this period The fund's biggest overweights by a wide margin remained in financials and energy, whereas our largest underweights were in consumer discretionary and information technology. These latter two allocations fit my theme of avoiding or limiting exposure to a handful of fast-growing, highly valued companies offering what I believe were poor risk/reward trade-offs. Later on, I'll have more to say about my thought process here. For several years, the fund has been significantly overweight in financials. This stance reflects my view that many companies in the sector have been undervalued by the market. Representing about 23% of fund assets, the sector began its recovery last summer and gained 14% the past six months. In recent years, the market's expectation has shifted from a deflationary environment with downward pressure on interest rates and bond yields to one characterized by upward pressure on rates and yields. In addition, loan growth has picked up, while hope for industry deregulation further has boosted the sector. This period, the fund's top contributors included large banks benefiting from higher interest rates, which tend to create more-profitable lending conditions. Citigroup, Bank of America and JPMorgan Chase all performed very well for the fund, and all were among our largest holdings. Q: How did you approach energy stocks I remained overweight based on my view that the sector's down cycle is a function of excess supply and not a demand issue, as global demand has been steadily increasing. Although supply returned to the market over the short term due to a combination of increased production from U.S. shale producers and the easy availability of capital via debt and equity markets I'm expecting supply growth to moderate over the long term as capital becomes more expensive and less available to marginal producers. We may even have begun to see this occur, as the price of oil hit a series of new highs in the period's final months. The fund benefited from this situation, although not enough to make up for the unhelpful overweight early in the period. Within energy, our investments in pipeline operators Williams Companies, Williams Partners and Kinder Morgan hurt our relative result the past six months. In these cases, I think the market has been treating them more like exploration and production (E&P) companies which have been more vulnerable to persistently low oil prices than the relatively stable, cash-generative and less-commodityexposed businesses that I believe they are. Williams Partners was a non-benchmark holding. Q: Which other stocks detracted A couple of out-of-benchmark health care holdings, drugmakers Teva Pharmaceutical Industries and GlaxoSmithKline, were notable detractors this period. Throughout the past year, Teva had one challenge after another. Although I've lost significant confidence in the company, I do think that the market overcorrected in its negative assessment. As of October 31, Teva's valuation was well below my price target for the stock, which is why it remained in the portfolio. I'll also be closely watching the company's new CEO, who is due to take the reins on November 1 and, shortly afterwards, begin implementing a turnaround strategy. My willingness to stick with this stock over the longer term may well be affected by how credible I find the company's plan. With Glaxo, I found this U.K.-based drugmaker appealing both for its attractive valuation and business transition to a more-diversified product mix. Late in the period, some confusion about Glaxo's commitment to supporting its dividend caused the company's shares to drop. As of October 31, however, I still have confidence in Glaxo's ability and willingness to continue paying its dividend, and therefore am sticking with our position. Q: In addition to the three banks you noted, which stocks contributed Our sizable stake in Microsoft gained 23%, as the software maker announced much-better-than-expected quarterly earnings. The firm has been successfully transitioning away from its legacy license-based software business to a moreprofitable subscription-based model, and also has positioned itself as an emerging leader in cloud computing. Microsoft was our largest holding as of October 31. Also, although stock picking in health care was detrimental overall, I should point out that the fund did materially benefit from my decision to avoid two weak-performing benchmark stocks, drugmaker Merck and biotechnology company Celgene, whose shares returned about -10% and -19%, respectively. Similarly, not owning poor-performing telecommunication services provider and benchmark stock AT&T (-13%) added value. None was a good fit for my management approach, so I chose to invest in areas of the market where I saw better long-term potential. 3 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

4 LARGEST CONTRIBUTORS VS. BENCHMARK Matt Fruhan on the fund's underweights in technology and consumer discretionary: "In the slow-growth environment of the past few years, investors have crowded into a relatively small handful of fast-growing companies. These include highly profitable businesses such as social-media platform Facebook, as well as competitively dominant firms with less-robust balance sheets, including streaming entertainment company Netflix, e-commerce giant Amazon and electric automobile maker Tesla. "I consider each a good business, some better than others. The problem I see is that, as of October 31, their stocks are trading at massive premiums that I don't believe reflect their true prospects for future earnings. The portfolio does not include Netflix, Amazon and Tesla, and holds a modest, below-benchmark stake in Facebook. "In the case of a financially strong company like Facebook, it's done a phenomenal job taking market share. But investors already appear to have priced in the fact that future growth will continue at the same pace as past growth an unlikely event as the law of large numbers starts to kick in. "I'd put Amazon and Tesla in a different category than Facebook neither generates a lot of earnings or cash flow, and their financial situations tend to be less secure. "But for most of these companies, the market now expects the current stock-performance streak to continue, and has priced the shares accordingly." Holding Market Segment Average Relative Relative Contribution (basis points)* Citigroup, Inc. Financials 2.26% 33 AT&T, Inc. Telecommunication Services -1.10% 26 Bank of America Corp. Financials 2.26% 21 Merck & Co., Inc. Health Care -0.83% 16 Dynegy, Inc. Utilities 0.23% 14 * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Market Segment Average Relative Relative Contribution (basis points)* General Electric Co. Industrials 1.16% -53 Teva Pharmaceutical Industries Ltd. sponsored ADR GlaxoSmithKline PLC sponsored ADR NVIDIA Corp. The Williams Companies, Inc. * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Health Care 0.56% -48 Health Care 1.55% -28 Information Technology -0.45% -27 Energy 1.51% -22 Six Months Ago Domestic Equities 91.76% 90.56% International Equities 6.49% 6.06% Developed Markets 6.46% 6.03% Emerging Markets 0.03% 0.03% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.09% 0.09% Cash & Net Other Assets 1.66% 3.29% 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 Information section of this Q&A.

5 MARKET-SEGMENT DIVERSIFICATION 10 LARGEST HOLDINGS Market Segment Six Months Ago Financials 23.34% 22.05% Information Technology 19.15% 18.17% Health Care 14.61% 14.58% Energy 12.61% 12.43% Industrials 10.77% 10.94% Consumer Staples 6.52% 5.65% Consumer Discretionary 5.51% 7.85% Materials 3.42% 3.23% Utilities 1.20% 0.94% Telecommunication Services 0.96% 0.58% Real Estate 0.17% 0.25% Other 0.00% 0.00% Holding Microsoft Corp. Market Segment Information Technology Six Months Ago 3.71% 3.09% Bank of America Corp. Financials 3.61% 3.34% Citigroup, Inc. Financials 3.19% 2.88% JPMorgan Chase & Co. Financials 3.17% 3.25% Apple, Inc. Information Technology 2.95% 3.20% ConocoPhillips Co. Energy 2.11% 1.83% State Street Corp. Financials 1.94% 1.94% Comcast Corp. Class A Alphabet, Inc. Class A Consumer Discretionary Information Technology 1.94% 2.02% 1.91% 1.87% General Electric Co. Industrials 1.83% 2.31% 10 Largest Holdings as a % of Net Assets 26.36% 25.74% 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 October 31, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Large Cap Stock Fund Gross Expense Ratio: 0.62% % 12.27% 21.39% 8.47% 14.82% 7.46% S&P 500 Index 9.10% 16.91% 23.63% 10.77% 15.18% 7.51% Morningstar Fund Large Blend 8.25% 15.50% 22.34% 9.01% 13.70% 6.62% % Rank in Morningstar Category (1% = Best) % 70% 32% 23% # of Funds in Morningstar Category ,394 1,214 1, Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/22/ 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. 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 Information section of this Q&A.

6 Definitions and Important Information immediately under the fund name in the Performance Summary. 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. FUND RISKS 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 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. 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. 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 reinvested dividends and capital gains, if any, and exclude sales charges. Multiple share classes of a fund have a common portfolio but impose different expense structures. 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 6

7 Manager Facts Matthew Fruhan 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. Fruhan manages Fidelity Advisor Capital Development Fund, Fidelity Series Growth & Income Fund, Fidelity Advisor Series Growth & Income Fund, Fidelity Growth & Income, Fidelity Advisor Growth & Income Fund, and Fidelity VIP Growth & Income. Additionally, he manages Fidelity Mega Cap Stock Fund, Fidelity Advisor Mega Cap Stock Fund, Fidelity Large Cap Stock Fund, and Fidelity Advisor Large Cap Fund, as well as co-manages Fidelity Equity-Income Strategy, a separately managed account (SMA). Prior to assuming his current responsibilities, Mr. Fruhan managed Fidelity Advisor Financial Services Fund, VIP Financial Services, and Select Financial Services. Previously, he served as the industrials sector leader and managed Fidelity Advisor Industrials Fund, VIP Industrials, and Select Industrials. Prior to that, Mr. Fruhan managed Select Defense and Aerospace, Select Air Transportation, and Select Consumer Staples. Additionally, Mr. Fruhan worked as an equity analyst following the food and supermarket industries, and in Fidelity's High Yield Research department following the specialty retail, automotive supply, and transportation industries. He has been in the investment industry since joining Fidelity in Mr. Fruhan earned his bachelor of arts degree, cum laude, in economics from Harvard College and his master of business administration degree from Harvard Business School. 7 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

8 PERFORMANCE SUMMARY: Quarter ending December 31, Annualized 5 10 / LOF 1 Fidelity Large Cap Stock Fund Gross Expense Ratio: 0.62% % 10.11% 15.41% 8.55% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/22/ 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. Information 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.