Finding the next market leaders and 2 stocks to watch

Please note this interview was recorded on 11 March 2025.

Fund profile

• Name of the fund and ASX ticker: Fidelity Global Future Leaders Active ETF (ASX: FCAP)
• Asset Class: Global equities
• Investment objective: To outperform the MSCI World Mid Cap Index (AUD) over the suggested minimum investment time period of seven or more years.
• Fund Page: (VIEW LINK)

Who doesn’t dream of uncovering the likes of a future Nvidia or Apple while still a small or mid-cap business? There’s few of us who don’t wish we had that ability, but for Fidelity’s Maroun Younes, this is all part of his day job.

The co-portfolio manager of the Fidelity Global Future Leaders Fund has been focused on these opportunities for close to five years, with the fund more recently becoming available as a listed ETF on the ASX in the last year.

The portfolio has outperformed the market since inception in 2020 – no small deal when you consider volatility, particularly in the small and mid-cap space in that period.

But, on to the question everyone wants to know - what makes a company a future leader?

It comes down to a competitive advantage.

“Ideally what you want is a business that solves a particular problem, a particular pinch point, not a nice to have or fad, but something that is a structural pain point,” says Younes.

“What we also want to see is a business with a good growth runway ahead of itself. A business that can generate a lot of, not only free cash, but high returns on invested capital and really take the cash and redeploy it back into investment opportunities, earn good rates of return on that, and then keep that flow going forward.”

Younes notes that “honest and transparent management” is also critical to the longer-term prospects of such businesses.

What a future leader looks like

Focusing on these qualities has uncovered companies like Scout24 and Autotrader, which Younes compares to Germany’s version of Realestate.com and the UK’s version of Carsales.com.

“They’ve got a superior product, superior customer reach. They have got a long runway of growth so they can continue to compound growth for many, many years to come, they earn really good rates of return on their invested capital, good management teams, strong balance sheets, free cashflow conversion, all those sorts of things we like,” he says.

Better yet, Younes points out these businesses are not only dominant in their respective geographies, they are currently trading at cheaper valuations compared to the likes of realestate.com or carsales.com.

A generational opportunity

Large caps have dominated investor attention in recent years, but Younes believes now is the time to turn towards small and mid-cap companies.

“What we are seeing now is the largest discount that you can see in over 20 years [for P/E of small-mid caps versus large caps],” Younes says, noting it’s similar when you look at the price-to-book ratios, or even things like free cashflow or EBITDA.

“The relative valuation of small and mid-caps is now so compelling, we really haven’t seen this in generations.”

In the above Fund in Focus, Younes discusses his approach to identifying future leaders with two examples, global small and mid-caps compared to Australian, and why now is a good time to consider small and mid-caps.

He also shares the ongoing opportunities he sees in the US market and how investors can use FCAP as part of their broader portfolio.

Time codes

0:00 - Introduction
0:38 - The qualities of a future leader
1:50 - The definition of global small and mid-caps
3:10 - Why investors should consider global small and mid-caps right now
4:30 - Opportunities in the US
5:20 - Examples of portfolio holdings
6:40 - How investors can use the strategy as part of their portfolio

A portfolio of future leaders

Maroun uses a rigorous bottom-up stock selection process that focuses on finding attractively valued companies with strong competitive positioning and sound company management. Learn more via the Fund Profile below, or by visiting the Fidelity website. 

ETF

Fidelity Global Future Leaders Active ETF (FCAP)

Global Shares

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