Fidelity Mid-Cap Stock Fund

Transcription

1 Fidelity Mid-Cap Stock Fund Key Takeaways For the semiannual reporting period ending October 31, 2017, the fund's Retail Class shares gained 9.01%, outpacing the 6.74% return of the benchmark S&P Midcap 400 Index. The fund was well-positioned among cyclical stocks and sectors that outperformed the past six months, as investors favored areas of the market that stood to benefit from any fiscal stimulus. From a sector perspective, security selection among consumer discretionary and financials stocks fueled the fund's outperformance of its benchmark. Conversely, a large overweighting in energy hurt the fund's relative result, as did an allocation to cash in a rising market. The fund's biggest individual contributor this period was a sizable position in homebuilding and mortgage banking firm NVR, followed by Luxemburg-based Eurofins Scientific, a provider of laboratory services for food, environment, pharmaceutical and agroscience customers. Turning to individual detractors, avoiding index component Take- Two Interactive Software hurt relative performance most. Given the late stage of the market cycle and that we're in the ninth year of a bull market, the portfolio managers are paying particular attention to monitoring fundamentals and identifying valuation risk. Amid a transforming environment for retailing, the managers have found opportunities in some high-end, niche luxury brands, as well as discount retailers. 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. On July 1, 2017, Nicola Stafford became Co-Manager of the fund, joining Lead Manager John Roth. Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A John Roth Lead Manager Fund Facts Trading Symbol: FMCSX Nicola Stafford Co-Manager Start Date: March 29, 1994 Size (in millions): $8, Investment Approach Fidelity Mid-Cap Stock Fund is a diversified domestic equity strategy focused on companies valued at $1 billion to $10 billion across the growth-to-value universe. Philosophically, we believe a company's stock price reflects the market's collective view of its future earnings power, but the collective view is often wrong. We believe bottom-up, fundamental analysis can identify those opportunities where our earnings forecasts deviate from consensus, and where the potential reward for being right is high. We look for growth stocks where we have a differentiated view on the magnitude or sustainability of the growth rate; cyclical stocks, based on differing expectations for the timing, duration or magnitude of the cycle; and intrinsicvalue stocks, where we have a contrary assessment of the underlying asset value. In constructing the portfolio, we size positions by assessing our conviction in the differentiated view on future earnings power versus its potential payoff. An interview with Lead Manager John Roth and Co- Manager Nicola Stafford Q: How did the fund perform the six months ending October 31, 2017 J.R. The fund's Retail Class shares gained 9.01%, outpacing the 6.74% return of the benchmark, but underperforming our peer group average. The risk-on rally following the election of Donald Trump extended through this six-month period. Investors remained excited by the possibility of fiscal stimulus and of tax cuts for individuals and corporations, which many thought could support loan growth and credit accessibility while helping to accelerate economic growth. As a result of these dynamics, the market was led by morecyclical stocks and sectors that stood to benefit from any fiscal stimulus. The fund was well-positioned for this environment. In particular, our picks among consumer discretionary and financials stocks fueled the fund's outperformance of its benchmark. Looking a bit longer term, the fund gained about 22% for the trailing year, but lagged both the benchmark and peer group average. Q: What specific choices boosted fund performance most the past six months J.R. Our biggest individual contributor was homebuilder and mortgage banking firm NVR, as our overweighted position gained 55% this period. One of the fund's largest holdings, NVR is a good example of a type of stock Nicky and I look for: names where we have a more positive view than consensus of a company's future fundamentals. We believe these types of stocks should outperform the fund's benchmark over time. Housing is the one segment of the U.S. economy that is still recovering from the financial crisis, with slow-but-steady progress off the bottom. Ongoing demand for housing, combined with insufficient supply, boosted stocks of homebuilders, including NVR. In addition, the stock popped in October on the firm's announcement of strong third-quarter financial results. 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 Fiat Chrysler Automobiles is another consumer discretionary name that landed among our biggest contributors. The stock surged in August after reports surfaced that Chinese automaker Great Wall Motors showed interest in acquiring some of Fiat Chrysler's business segments. No deal had materialized by period end. Overall, the fund's stake in Fiat Chrysler advanced about 53%. We materially added to our position in Fiat this period, confident in the firm's future growth prospects. Q: Turning to you, Nicky, what else notably influenced relative performance N.S. The fund's largest holding, Eurofins Scientific, was another positive. Shares of the Luxemburg-based firm, which provides laboratory services for food, environment, pharmaceutical and agroscience customers, benefited from the firm's strong second-quarter financial results. Throughout the period, the company sustained its organic growth, and continued to expand its footprint in areas such as environmental testing and biopharmaceutical services by acquiring several firms around the globe. As John mentioned, stock selection in financials was a big plus overall. This included the fund's investment in mortgage insurers MGIC Investment and Radian Group, which rose about 36% and 24%, respectively. Bank stocks rallied in the fall because the path to President Trump's proposed tax-reform package appeared clearer. Turning to notable detractors, avoiding gaming company and index component Take-Two Interactive Software hurt relative performance most. The stock began to climb in August, after the firm reported net fiscal 2018 sales of about $350 million, well above analyst estimates, giving a further boost to its already ascending stock price. Shares of Take-Two finished the period up 76%. Q: Aside from Take Two, what disappointed N.S. The fund's large overweighting in energy proved a notable negative, as the sector returned roughly -6%, lowest among sectors in the benchmark. Energy stocks were hampered by a decline in oil prices early in the period, combined with investors' concern about the sustainability of prices as they began to rise. Here, our large stake in Williams Companies dragged on fund performance. Williams Companies owns a majority stake in Williams Partners, a master limited partnership (MLP) and North American pipeline owner and, I should note, another big fund position and detractor this period. In addition, we held a cash position of about 6%, on average, which was a significant detractor amid a strong market. Being roughly nine years into the market recovery, we maintained our cash on hand, as we became more sensitive to valuations and aimed to be flexible in case we hit turbulence. I should also note that the benchmark represents only a portion of the fund's investment universe. As a result, we're able to cast a wide net in terms of opportunities. It should come as no surprise, then, that all of the stocks I've mentioned were non-benchmark holdings, except NVR. Q: John, what is your outlook as of October 31 J.R. It has been nine years since the financial crisis, which is on the long side for a bull market. Margin expansion and earnings growth have continued to be anemic, and multiple expansion has been the more significant driver of performance for the past several years. Additionally, most stocks and asset classes now look expensive to us relative to their historical valuations. We think there is sufficient evidence supporting our view that we are in the later innings of a market cycle. While this doesn't really change what we do, we think it's particularly important to be diligent in monitoring fundamentals and identifying valuation risk. Every cycle is different, and existing conditions matter. We are constantly shown models and correlation studies that use the past to predict the future. They are often wrong, because the models mistake correlation for causality. Just because things happened in the past, that doesn't necessarily mean that the conditions that caused that outcome still exist. The good news is that while conditions change, human nature typically doesn't, and we can use financial theory and behavioral analysis to guide us. This is a place where thinking may trump computing power. We need to focus on understanding cause and effect in past cycles to have any chance of garnering insight into future trends and dynamics. The fund has a flexible mandate, so we would expect continued pivoting in positioning next year. Lastly, volatility appears to have returned to equity markets. While volatility is unpleasant to experience, it is not risk per se, despite what the academics and risk models say. We believe risk to be the permanent loss of capital, and that volatility simply creates good opportunities to buy or sell at potentially great prices. We will try to exploit that, as well. 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 John Roth on the consumer discretionary sector: "Industries within consumer discretionary produced mixed results the past six months, as some faced significant fundamental challenges. Retailing, in particular, has faced some of the most marked challenges, as business models adapt to a new industry landscape. Steep competition from internet retailers and existing players has crippled brick-and-mortar retailers, which also suffer from excess supply of storefronts. For many years, retail square footage in the U.S. grew. However, after two years of declining foot traffic against a decent backdrop of consumer spending, it is becoming clear that we may simply have overbuilt capacity. "It appears consumers have decided that they would like the best of both worlds select purchases delivered to their homes, and other purchases transacted in stores. "The competitive dynamic can be seen most clearly in the case of apparel retail. Competition is intensifying in the space, particularly among fastfashion concepts such as Zara, H&M and Uniqlo as well from brands' efforts to go direct to the consumer through physical stores and online. "The market appears to be bifurcating, with highend luxury remaining exclusive and discount considered 'fast fashion.' Given the divisive market, the fund owns a number of high-end, niche luxury brands, such as Tiffany and Brunello Cucinelli. We also own retailers taking share of the discount market, such as Dollar General, where the online threat is minimal, since most sales are in cash, and the stores offer better value on consumable purchases versus convenience stores. "Undoubtedly, volatility can lead to opportunities, but we intend to remain cautious of attractively valued stocks of firms that may need a longer-term adjustment of their business models." Holding NVR, Inc. Market Segment Average Relative Relative Contribution (basis points)* 1.24% 50 Eurofins Scientific SA Health Care 2.41% 43 Fiat Chrysler Automobiles NV 0.78% 33 MGIC Investment Corp. Financials 0.87% 24 ARAMARK Holdings Corp. * 1 basis point = 0.01%. LARGEST DETRACTORS VS. BENCHMARK Holding Take-Two Interactive Software, Inc. The Williams Companies, Inc. Market Segment Information Technology 1.89% 23 Average Relative Relative Contribution (basis points)* -0.54% -28 Energy 2.04% -25 DexCom, Inc. Health Care 0.36% -21 Williams Partners LP Energy 1.47% -21 Forterra, Inc. Materials 0.10% -20 * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Six Months Ago Domestic Equities 79.87% 82.49% International Equities 12.99% 10.58% Developed Markets 11.59% 9.14% Emerging Markets 1.40% 1.31% Tax-Advantaged Domiciles 0.00% 0.13% Bonds 0.29% 0.28% Cash & Net Other Assets 6.85% 6.65% 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 18.78% 15.72% Information Technology 15.23% 18.22% 13.66% 10.75% Industrials 11.93% 12.89% Health Care 10.09% 11.50% Energy 7.77% 9.11% Utilities 5.60% 5.33% Real Estate 4.11% 4.08% Staples 3.05% 2.55% Materials 2.37% 2.69% Telecommunication Services 0.27% 0.24% Other 0.00% 0.00% Holding Market Segment Six Months Ago Eurofins Scientific SA Health Care 2.56% 2.09% ARAMARK Holdings Corp. 2.09% 1.49% The Williams Companies, Inc. Energy 1.89% 2.10% NVR, Inc. 1.86% 1.47% Boston Scientific Corp. Health Care 1.64% 1.59% First American Financial Corp. First Data Corp. Class A Financials 1.61% 1.33% Information Technology 1.50% 1.37% Williams Partners LP Energy 1.34% 1.54% Arch Capital Group Ltd. Financials 1.33% 1.34% Atmos Energy Corp. Utilities 1.31% 1.26% 10 Largest Holdings as a % of Net Assets 17.15% 15.66% 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 Mid-Cap Stock Fund Gross Expense Ratio: 0.58% % 15.31% 21.57% 9.23% 14.37% 7.23% S&P MidCap 400 Index 6.74% 11.88% 23.48% 10.71% 15.13% 8.96% Morningstar Fund Mid-Cap Growth 10.21% 19.84% 26.06% 8.94% 13.66% 6.81% % Rank in Morningstar Category (1% = Best) % 49% 35% 42% # of Funds in Morningstar Category Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 03/29/ 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 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. The securities of smaller, less well-known companies can be more volatile than those of larger companies. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks 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 immediately under the fund name in the Performance Summary. 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. Effective 7/1/17, John Roth transitioned to lead portfolio manager and Nicola Stafford to co-portfolio manager of the fund. 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 MidCap 400 Index is a market-capitalization-weighted index of 400 mid cap stocks of U.S. companies chosen for market size, liquidity, and industry group representation. 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 6

7 Manager Facts John Roth is a portfolio manager 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. staples. Before re-locating to London in 2006, Ms. Stafford covered IT services companies and managed Fidelity Select IT Services and U.S. consumer discretionary. She has been in the investments industry since joining Fidelity in Ms. Stafford earned her bachelor of science degree in mechanical engineering and economics from the Massachusetts Institute of Technology (MIT). In this role, Mr. Roth manages Fidelity New Millennium Fund (since 2006) and Fidelity Mid-Cap Stock Fund (since 2011). He also co-manages Fidelity Advisor New Insights Fund (since 2013). Prior to assuming his current responsibilities, Mr. Roth was comanager of Fidelity Balanced Fund, Fidelity Advisor Balanced Fund and Fidelity Series All-Sector Equity Fund from 2008 to He also managed the consumer discretionary sub-portfolio of VIP Contrafund from 2007 to Previously, Mr. Roth held various other roles at Fidelity, including that of consumer sector leader/portfolio manager of Select, VIP, Fidelity Advisor Fund, and Fidelity Select Multimedia from 2004 to Additionally, he was portfolio manager of Select Chemicals from 2002 to 2004 and Select Utilities from 1999 to 2002, and an equity analyst starting in Before joining Fidelity full-time in 1999, Mr. Roth worked as an equity trader at Tucker Anthony from 1992 to He has been in the financial industry since Mr. Roth earned his bachelor of arts degree in economics from Colby College and his master of business administration degree from the MIT Sloan School of Management. He is also a CFA charterholder. Nicola Stafford 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, Ms. Stafford manages the consumer discretionary sleeves of Fidelity Balanced Fund, Fidelity VIP Balanced Fund, and Fidelity Advisor Balanced Fund. Additionally, she manages Fidelity Select Retailing and co-manages Fidelity Mid- Cap Stock Fund. Prior to assuming her current responsibilities, Ms. Stafford covered U.S. consumer durable retail stocks for FMR Co. and served as a research analyst at Fidelity International Limited (FIL) in London. During her time in London, she managed a global consumer industries fund and created and co-managed a global demographics fund. She also covered European consumer 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 Mid-Cap Stock Fund Gross Expense Ratio: 0.58% % 9.75% 14.50% 8.29% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 03/29/ 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.