The overlooked sector ripe with future market leaders

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)

When we think of future market leaders, our thoughts often lean towards technology. And why not? After all, this is the sector where we typically see significant disruptive innovation and has been responsible for the greatest returns in recent years.

Fidelity International’s Maroun Younes does have an overweight position in his portfolio to technology, but cautions investors not to overlook the sector he terms as “older economy” or less “glamorous”, industrials. In fact, it even forms the largest sector position in his portfolio.

“Sometimes, they’re quite boring but stable business models, and so I think a few of those have been overlooked in favour of more glamorous technology names. 

What that has meant over the last two or three years, we have been able to find really high-quality niche businesses that do what they do incredibly well, dominate their market and they’ve been reasonable attractively priced,” Younes says.

In this interview for Livewire’s Listed Series, Younes discusses the opportunities in industrials, what to watch on the tech side and how he is investing in a more volatile market.

Where uncertainty creates opportunities

There’s a lot of noise in markets right now but Younes is focused on earnings growth, while cautioning that we are in the late stages of a bull market.

He notes this is interlinked with interest rates – which has flow on effects to consumer and corporate activity, and geopolitics.

“We have been incrementally looking at more domestically focused industries. Particularly with the US, if you go down the path of tariffs, if you go down the path of more friction towards global trade, ideally you want less companies exposed to that globalised world and a bit more by the way of companies that sell purely to the domestic market,” Younes says.

One sector that he is seeing a resurgence in is defence, particularly in Europe off the back of concerns that the US may step away from NATO and to secure itself from further regression.

Industrials also plays into this domestic alignment.

“A lot of these industrials are selling manufacturing in the US – selling to the US, not global businesses,” Younes says.

“If you are looking at ways to avoid or sidestep any of the collateral damage from frictions to global trade and from some of these tariffs, we are finding a few industrials that are able to give us some of that insulation if you like.”

Interestingly, another less ‘exciting’ part of the market that Younes has found opportunity in is insurance, with mid-market insurance broker Brown & Brown (NYSE: BRO) his highest conviction pick.

“As inflation comes through the cost of replacing buildings or cars, etc., go up, insurers pass on those costs to their customers. Brokers get paid a certain percentage on the insurance premium,” Younes explains, highlighting that brokers own the customer relationship without needing to underwrite any of the insurance risk.

He describes Brown & Brown as “a high-quality long-term compounder. They’ve been able to generate really good returns on equity for long periods of time, really good cashflow, got a solid balance sheet.”

He adds that its mid-market space can continue to generate good value from acquisitions, focusing on businesses that are too small for the likes of an AON or Marsh.

Taking a measured approach to technology

With tech stocks hard hit in the current uncertainty, Younes takes a careful approach to identifying future leaders. He notes his analysis begins with questioning what he thinks won’t necessarily change in the next 10 years.

“If you can find businesses that have got stable models, recurring revenue streams where perhaps they won’t become obsolete or taken over by a superior competitor anytime soon. 

Those are some of the more attractive businesses because they’re more predictable in nature and you can be a bit more safe in terms of knowing that the business model is not going to materially change of the next five to 10 years,” Younes says.

An example of a technology business he likes (it’s also in the top 10 of his portfolio), is CDW Corp (NASDAQ: CDW).

The business is a value-added reseller which sits between product vendors and customers, primarily servicing smaller SMEs that wouldn’t traditionally have the ability to access discounted pricing on software or tailored servicing.

“CDW’s business model has been around for a long, long time. Very stable margins, generates incredible returns on invested capital, has been growing compounding for decades and we think that will continue,” Younes says.

He believes it has the ability to continue to take market share, and it already is the largest operator in its space.

Finding market leaders in a volatile market

Watch the above video to find how Younes is approaching the current market, stays on top of rapid innovations in technology, investing in the energy space and more detail on his top stock picks. He also shares a recent divestment of a biotech business from the 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.

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Fidelity Global Future Leaders Active ETF (FCAP)

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