Stock Investing, Long-Term Views from Fidelity’s Co-Head of Equities

  • Pam Holding does not focus on “short-term market turns”, instead emphasizing long-term investing.
  • Sectors exposed to lasting trends include technology, healthcare and vehicle electrification.
  • Holding is also passionate about ESG investing as changing demographics drive that emphasis.

In Pam Holding’s 36-year career on Wall Street, some particularly interesting moments stand out for her.

The first memorable moment came in the late 1980s, when he got a job at Franklin Templeton working on high-yield bonds, right in the middle of the spiraling boom in junk-bond-financed leveraged buyouts fueled by Drexel Burnham. Michael Milken.

A few years later, the high-yield market crashed, Drexel Burnham went bankrupt, and Milken was sentenced to prison for securities fraud (he was pardoned in 2020 by then-President Trump for his role in cancer research).

In a recent interview with Insider, Holding said the last interesting time is now, as market battles heat up.


volatility

in the middle of a Federal Reserve rate hike cycle and the Russia-Ukraine crisis – not to mention the ongoing COVID-19 pandemic and already stretched stock valuations for 2022.

Company culture and mentoring.

For Holding, who studied history at Princeton and aspired to become a lawyer, a career on Wall Street wasn’t always on the cards. But after trying investment banking, she discovered that she enjoyed financial analysis more than she expected.

“Choosing companies, researching industries and trends, looking to the past to predict the future – that’s a lot of what I did as a history student,” he said.

But while she liked the work, Holding wasn’t a big fan of the culture—specifically, of not owning her work for its entire lifespan, but having to continually deliver one deal to move on to the next.

After two years, he went to the high-performance table at Franklin Templeton. While there, he received his MBA and eventually transitioned to Putnam Investments, a job he had pursued because of the team’s culture and leadership style and the company’s “great collaborative college environment.”

According to Holding, doing due diligence on a company’s culture and making sure it’s a good fit is one of the most important things he advises others to do.

“That’s a constant theme for me throughout my career, which is after that first experience with investment banking and the culture at the company I was at, I wasn’t about to budge on that going forward,” Holding said. “And especially as a working mom, I needed to find a career, but also a culture and a community that would allow me to have a fantastic family and career.”

Holding remained at Putnam for a total of 15 years, making the jump from fixed income to equities when a position opened in London to lead international equity research. At the time, it was a “terrifying proposition” and still one of the biggest professional challenges Holding has ever faced, but also an opportunity both to change his career path and to experience a new country and culture with his family.

For the past nine years, Holding has been at Fidelity, and four years ago she assumed her current role as co-head of the firm’s equity division with Tim Cohen. Among the mentors who have guided her throughout her career, Holding lists Fidelity CEO Abby Johnson as an influence on her.

“Building those kinds of relationships, I think is very important,” he said. “And it’s not always necessarily someone who’s like you, or like-minded, it’s someone who can actually be additive to your skill set and your thought set.”

Longer-term investment approach is key

Today, as co-head of Fidelity’s equity division, Holding oversees approximately $2.5 trillion of assets under management and approximately 300 employees worldwide. Considering the size of the pool of assets it manages, Holding told Insider it has to think about investing over a long period of time, looking for companies with “long-term sustainable business models” rather than, say, buying stock memes.

After the correction that opened the stock market this year, Holding believes equity returns are “starting to look attractive again,” particularly relative to Treasuries, corporates and even high-yield bonds. However, he warned that the rise in the stock market double digit returns in recent years will most likely remain in the past.

“We are still likely to see single-digit returns, which, on a relative basis, I think is still reasonably attractive. So I remain constructive in the equity space,” he said.

Holding also believes that the outperformance trend of value stocks reverse one more time return to the norm. Value stocks took center stage in 2020, flipping the script on a decade of consistent outperformance by growth stocks.

“The market leadership has changed. We’ve been through this inflection point where value has really outpaced growth,” he explained.

Due to Holding’s focus on longer-term market themes, he told Insider that he rarely “plays through short-term market gyrations caused by geopolitical events” such as the ongoing Russia-Ukraine conflict. . While energy and commodity prices have soared due to the crisis, Holding responded that every time “hears positive news about the situation in Ukraine and Russia, the price crashes.”

To think longer term within commodities, he advises investors to focus on companies that are exposed to lasting trends, such as vehicle electrification. Within that specific industry, Holding pointed to potential winning assets such as copper and any other raw materials for electric vehicle batteries.

In general, Holding singled out high-growth companies within the technology and health care sectors that look more attractive in the longer term.

“I still think we have a lot of companies that are revolutionizing all kinds of different industries through technology,” he said. “One of the things we’re really trying to do is identify those key disruptors in the long-term winners by sector.”

Within health care, Holding emphasized the importance of “picking your niche,” but believes the biotech industry appears particularly rich in opportunity.

“There are so many amazing companies developing amazing drugs,” he said. “And frankly, that sector has really been decimated in the last couple of months, so I think there are probably great short-term and even long-term opportunities within biotech.”

Changing demographics drive ESG investing

In addition to focusing on long-term performance, Holding, which recently took over as chief investment officer for sustainability at Fidelity, also underscored the importance of investing in environmentally and socially responsible assets.

“Obviously, I see the business case for making sure we have a robust process for integrating environmental, social and governance factors into our investment process,” he said. “But we also hear it from our customers. This is what they want.”

According to Holding, the pandemic helped play a critical role in advancing this approach, shining a light on various environmental and social justice issues. And as more women and younger populations join the ranks of retail investors, these changing demographics have also increased the focus on impact investing.

“Those two categories are our future investors because a lot of wealth is going into the hands of women,” Holding said. “Both of those two segments are extremely interested in investing along with their personal values.”

In general, financial education is a topic that Holding is very passionate about and has spent a lot of time on through his work at Fidelity. The ultimate goal, she said, is to help women and younger investors “overcome their fear of investing” and “gain more confidence” in their investment decision-making process.

To do this, Holding suggests attending seminars, listening to podcasts, and signing up with financial advisors early on. And even with his own children, Holding emphasizes the power of the compounding effect of the market.

“You have to be religious and consistent and think long term,” he said.

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