Fidelity Blue Chip Value Fund

Transcription

1 Fidelity Blue Chip Value Fund Key Takeaways For the semiannual reporting period ending January 31, 2018, the fund gained 10.12%, lagging the 11.33% advance of the benchmark Russell 1000 Value Index. The past six months, a market backdrop favoring growth-oriented investments was a headwind for value-oriented funds, including this one, according to Manager Sean Gavin. The fund's performance versus the benchmark was hampered most by stock picking in health care and energy, while security selection in information technology detracted to a lesser extent. The fund also was hurt by a roughly 3% allocation to cash, on average, which was in place to allow Sean to take advantage of available investment opportunities. Conversely, notable relative contributors included strong security selection and a helpful underweighting in the weak real estate sector, along with an underweighting in utilities and an overweighting in financials. Sean reduced exposure to information technology stocks the past six months, as he found this group less attractively valued after a strong run, and added selectively to consumer-oriented stocks. As of January 31, Sean thinks equity valuations are stretched, leading him to emphasize higher-quality, attractively valued stocks due to what he sees as their more-predictable performance potential. MARKET RECAP U.S. equities gained 15.43% for the six months ending January 31, 2018, as the S&P 500 index closed the period near an all-time high after a strong start to the new year. The lone exception to the uptrend was a brief cooldown in August, when geopolitical tension escalated and uncertainty grew regarding legislation out of Washington. Upward momentum soon returned and continued through year-end, with consumer sentiment and other market indicators staying positive. Investors remained decidedly upbeat as the calendar turned the index rose roughly 6% in January. Growth stocks handily topped value for the six months, while large-caps edged small-caps. By sector, information technology fared best, advancing 22% on strong earnings growth from several major index constituents. Financials (+20%) also stood out, riding the uptick in bond yields and a surge in banks (+24%). Consumer discretionary added 19%, driven by a roughly 33% gain for retailers. Materials rose about 16%, spurred by increased demand, especially from China. Conversely, notable laggards included some defensive-oriented categories, including utilities (-2%), telecommunication services (+5%) and consumer staples (+6%), that struggled amid investors' general preference for risk. Health care (+11%) fared better but still trailed the index. Lastly, rising interest rates held back real estate (+1%). Not FDIC Insured May Lose Value No Bank Guarantee

2 Q&A An interview with Manager Sean Gavin Fund Facts Trading Symbol: Sean Gavin Manager FBCVX Start Date: June 17, 2003 Size (in millions): $ Investment Approach Fidelity Blue Chip Value Fund is a large-cap, valueoriented strategy that seeks capital appreciation. We focus on companies where there is a significant price dislocation, believing that a stock's market value will move towards its intrinsic (fair) value over time. We seek to purchase securities with a large "margin of safety" and use three different valuation measures to determine a company's intrinsic value. We manage a concentrated portfolio of companies with both cheap valuations and high-quality franchises those with above-average returns on invested capital and that operate in businesses protected by strong entry barriers. Our strategy aims to benefit from lower earnings volatility and higher long-term growth. We also like firms with healthy cash-flow generation. Capital preservation is as important a factor in investing as is upside potential. The fund is structured to maintain a lower beta (sensitivity to market risk) and a higher-quality orientation than its benchmark, the Russell 1000 Value Index. Q: Sean, how did the fund perform for the six months ending January 31, 2018 The fund gained 10.12%, lagging the 11.33% advance of the benchmark Russell 1000 Value Index. The fund also lagged the peer group average. Versus the Russell index, the primary detriments were weak stock picking in health care and energy. Security selection in information technology was a lesser negative, as was a cash stake of roughly 3%, on average, which was in place to allow me to take advantage of market opportunities as they occur. In contrast, the fund was well-positioned in the real estate sector, where stock selection and an underweighting in this lagging group proved helpful. An underweighting in utilities and an overweighting in financials also added value. Looking back a bit further, the fund gained 17% for the trailing year, about in line with the benchmark and behind the peer group average. Q: Are you satisfied with the fund's result the past six months No portfolio manager likes to underperform the benchmark, and this period was no exception for the fund. Our largest individual detractor, Teva Pharmaceutical Industries, had a disproportionately negative impact on the fund's relative result, as I'll describe in a bit. That said, I do think it's a good sign that I was able to stay within range of our benchmark in an environment that was not necessarily ideally suited to my investment approach. The past six months, growth stocks continued to significantly outpace their value counterparts, posing a headwind for valueoriented funds such as this one. As a reminder, my approach is driven by the view that, over time, a stock's value eventually will converge with its intrinsic value its true underlying worth. I use three different valuation measures when determining the intrinsic value of a company, and I invest in what I believe are highquality firms. By high quality, I mean companies that operate in a specific niche or that possess a strong competitive position that provides a "moat," or barrier to entry, to their businesses. 2 For definitions, fund risks and other important information, please see the Definitions and Important Information section of this Q&A.

3 I also look for an above-average return on invested capital. Because of this focus on quality, I expect each of the fund's holdings to deliver a return on equity (ROE) a measure of profitability that significantly exceeds that of the benchmark. I believe this can lead to lower earnings volatility over time. Lastly, I pay close attention to a firm's cash generation, which I think can contribute to faster long-term growth when combined with a high ROE. Q: Which stocks detracted most relative to the benchmark for the six-month period As I suggested earlier, the biggest negative by far was a non-benchmark equity position in Teva Pharmaceutical Industries, an Israeli pharmaceutical company. Our investment in Teva returned -46%. Since I established the fund's Teva equity position, I viewed the stock as very cheap with a number of potential catalysts that might drive the company's share price. Unfortunately, over time, every one of those catalysts played out differently than I had hoped. In retrospect, I should have been more willing to reassess my original investment thesis and change course as it became clear to me how deep-rooted Teva's problems were. But because Teva's challenges tended to emerge gradually, it wasn't necessarily easy for me to see the big picture at the time. Had the company's challenges appeared more suddenly, I likely would have moved to sell our stake and cut the fund's losses earlier than I did. Teva was one of several pharmaceutical-related investments to detract from relative performance the past six months. Ireland-based Allergan and U.K.-based Shire both struggled this period, reflecting challenges to their businesses that I saw as temporary in nature but that caused the companies' shares to lose ground. Shire was a non-benchmark holding. Elsewhere, the fund was hampered by its investment in Teekay, a provider of energy-transportation services. I was frustrated in January when Teekay announced its plans to issue additional equity, thus diluting shareholders' ownership stake and reducing the fund's upside in the name. At period end, I continued to see good value here, albeit less so. Q: Which stocks helped The biggest relative contributor was my decision to avoid industrial conglomerate and benchmark component General Electric. My research led me to conclude that the story behind GE was complicated and not attractive to me. Specifically, I believed GE lacked superior business franchises. had an incredibly complex balance sheet and maintained too much financial leverage not to mention off-balance-sheet liabilities, such as pension obligations. Given all these factors, I chose to invest elsewhere. This turned out to be a good decision because in November GE announced plans to cut its dividend in half, causing a significant drop in the company's shares. One recent strong performer that did meet my criteria, however, was Berkshire Hathaway, a collection of businesses managed by legendary investor Warren Buffett. The fund's biggest holding, Berkshire Hathaway is a fantastic conglomeration of top-notch, well-managed businesses across several industries, in my view, and I was pleased to be able to invest in the stock at what I considered a steep discount relative to the value of the underlying businesses. Another relative contributor was PVH, owner of a number of well-known apparel brands, such as Calvin Klein, Kenneth Cole and Tommy Hilfiger. PVH shares had been depressed, perhaps due to the market's worries about the health of brick-and-mortar retailers, especially department stores. Still, PVH has done a good job investing in and generating cash flow from established brands, while simultaneously navigating the changing retail environment. PVH shares were up 30% for the six months. Q: Any closing thoughts for shareholders, Sean We're increasingly seeing a bifurcated market, with investors rewarding a narrow slice of technology and growth-oriented companies, while older, less-exciting companies often have been left in the dust. In this environment, I cut the fund's exposure to the information technology sector, where some of the greatest gains have been seen, while selectively adding to opportunities I saw in consumer-oriented stocks. As of January 31, we're in the second-longest bull market in U.S. history. Anytime you have especially high valuations, the market has in effect "borrowed" from future performance, in my view, so I see similarly high returns as unlikely in the next few years. That said, I don't see any immediate reason to think that the economy or corporate profit growth will slow down. In such an environment, I'm continuing to emphasize higher-quality value stocks to a greater degree. These types of investments will typically offer less upside potential, but I'd expect them to be more resilient in the face of market volatility. 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 Sean Gavin on which companies will benefit most from tax reform: "In December, long-anticipated federal tax reform legislation was signed into law. Now that the ink is dry, I'm expecting it to boost economic growth in the next year to 18 months, and then have a less significant impact over time. "Meanwhile, I think the legislation will benefit certain companies more than others, with the impact directly correlated to the strength of their competitive position. "For companies with less differentiated product offerings and a lot of competition think financial services I think the tax savings will get passed through to consumers in relatively short order. "But for companies that enjoy a large competitive advantage perhaps some valuable intellectual property provides a moat around their business I think they'll be much more able to preserve tax savings for investors over a longer time frame. "Choosing investments that have an opportunity to benefit from tax reform has not been an important part of my investment approach in recent months. "That said, because my process helps me identify companies with larger-than-average competitive moats, I'd expect the portfolio to benefit a bit more than the average company in the benchmark, many of which lack the same level of competitive advantage that is critical to my investment strategy." Holding Market Segment Average Relative Relative Contribution (basis points)* General Electric Co. Industrials -1.24% 72 Anthem, Inc. Health Care 1.72% 36 Berkshire Hathaway, Inc. Class B Financials 3.23% 34 Wells Fargo & Co. Financials 2.46% 32 Discover Financial Services * 1 basis point = 0.01%. Financials 1.59% 32 LARGEST DETRACTORS VS. BENCHMARK Holding Teva Pharmaceutical Industries Ltd. sponsored ADR Market Segment Average Relative Relative Contribution (basis points)* Health Care 0.20% -134 Allergan PLC Health Care 1.16% -59 Teekay Corp. Energy 1.82% -53 Bank of America Corp. Financials -2.17% -45 CBS Corp. Class B * 1 basis point = 0.01%. ASSET ALLOCATION Asset Class Consumer Discretionary 1.60% -41 Six Months Ago Domestic Equities 83.00% 78.34% International Equities 15.75% 20.27% Developed Markets 10.23% 14.59% Emerging Markets 5.52% 5.68% Tax-Advantaged Domiciles 0.00% 0.00% Bonds 0.00% 0.00% Cash & Net Other Assets 1.25% 1.39% 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 33.24% 29.24% Health Care 14.40% 18.23% Consumer Discretionary 12.38% 8.35% Consumer Staples 9.84% 6.80% Energy 8.65% 7.60% Information Technology 7.03% 15.08% Industrials 5.72% 5.58% Materials 3.04% 2.21% Real Estate 2.59% 2.23% Utilities 1.85% 3.28% Telecommunication Services 0.00% 0.00% Other 0.00% 0.00% Holding Berkshire Hathaway, Inc. Class B Market Segment Six Months Ago Financials 6.66% 5.64% Wells Fargo & Co. Financials 5.02% 4.22% Amgen, Inc. Health Care 3.83% 3.74% JPMorgan Chase & Co. Financials 3.74% 3.08% CVS Health Corp. Consumer Staples 3.36% 2.03% U.S. Bancorp Financials 3.12% 3.00% Cigna Corp. Health Care 2.95% 2.89% Prudential PLC Financials 2.76% 2.58% CBRE Group, Inc. Real Estate 2.59% 2.23% United Technologies Corp. Industrials 2.53% 2.26% 10 Largest Holdings as a % of Net Assets 36.56% 35.41% 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 January 31, Month Cumulative YTD 1 3 Annualized 5 10 / LOF 1 Fidelity Blue Chip Value Fund Gross Expense Ratio: 0.79% % 4.69% 16.75% 10.47% 13.53% 5.60% Russell 1000 Value Index 11.33% 3.87% 17.22% 11.54% 13.47% 7.95% Morningstar Fund Large Value 13.11% 4.25% 19.86% 11.52% 13.00% 7.87% % Rank in Morningstar Category (1% = Best) % 75% 42% 94% # of Funds in Morningstar Category ,248 1, Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/17/ 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. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. Value stocks can perform differently than other types of stocks and can continue to be undervalued by the market for long periods of time. 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. 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 Value Index is a market-capitalization-weighted index designed to measure the performance of the large-cap value segment of the U.S. equity market. It includes those Russell 1000 Index companies with lower price-to-book ratios and lower expected growth rates. 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 2018 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 Sean Gavin 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. Gavin manages Fidelity Value Discovery Fund, Fidelity Advisor Equity Value Fund, Fidelity Advisor Value Leaders Fund, and Fidelity Blue Chip Value Fund. Additionally, he comanages Fidelity Series Equity Income Fund and Fidelity Advisor Series Equity Income Fund. Prior to assuming his current position in January 2012, Mr. Gavin was a research analyst in FMR Co.'s Equity division. During this time, he worked as a diversified analyst on the Value team, as a food and beverage analyst, and as a transportation analyst. Before joining Fidelity in 2007, Mr. Gavin was an assistant portfolio manager at Pioneer Investments and a research analyst at both Boston Partners Asset Management and at Delphi Management. He has been in the investments industry since Mr. Gavin earned his bachelor of arts degree in mathematics from Oberlin College and his bachelor of music degree in trombone performance from the Oberlin Conservatory. He is also a CFA charterholder. 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 Blue Chip Value Fund Gross Expense Ratio: 0.79% % 7.79% 13.97% 4.56% 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/17/ 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.