Fidelity OTC Portfolio Q2 2025 Commentary: Performance Review

Fidelity OTC Portfolio's Q2 2025 commentary reports a 16.16% gain for its Retail Class shares, trailing the NASDAQ Composite Index's 17.96% advance. U.S. large-cap growth stocks, which comprised the majority of the benchmark, outperformed the fund. The commentary highlights the performance of the fund and provides an insight into the market trends.

Fidelity OTC Portfolio's Retail Class shares (MUTF:FOCPX) reported a 16.16% gain in the second quarter of 2025, trailing the NASDAQ Composite Index's 17.96% advance [2]. The fund, which invests primarily in common stocks, saw its performance hampered by security selection in the information technology sector and an overweight in the lagging health care sector [2]. Despite these factors, the fund's performance was buoyed by strong contributions from the communication services sector, with Circle Internet Group (CRCL) being a notable standout [2].

The fund's investment approach focuses on dynamic growth companies listed on the Nasdaq stock exchange, with a particular emphasis on companies with above-average earnings growth potential and sustainable business models [1]. The portfolio manager, Christopher Lin, aims to identify companies with products that meet market demand, possess competitive advantages, and are led by strong management teams [1].

The fund's positioning remained relatively unchanged during the quarter, with a cautious optimism as the market entered the second half of 2025. The fund's largest sector overweight as of the quarter end was communication services, with Alphabet (GOOG) and Netflix being core positions [2]. In information technology, the fund maintained a slight underweight, leaning into semiconductors and semiconductor equipment while underweighting software and services [2].

The fund's largest underweights at the end of June were Tesla (TSLA) and chipmaker Broadcom (AVGO). While the fund likes Tesla's products and believes in the long-term future of electric cars, it is concerned about the stock's valuation and recent sales performance [2]. Broadcom's exposure to generative AI has been overestimated, leading the fund to choose other companies for exposure to this theme [2].

The fund's investment approach is characterized by its bottom-up, fundamental analysis, which seeks to exploit inappropriate valuations in the market. The fund's performance versus the benchmark was hampered by security selection in information technology and an overweight in the lagging health care sector [2].

In conclusion, Fidelity OTC Portfolio's Q2 2025 performance was impacted by sector-specific factors and security selection. Despite these challenges, the fund's cautious optimism and focus on durable growth opportunities position it well for the second half of 2025. As the market continues to evolve, investors should closely monitor the fund's performance and positioning.

References:
[1] https://finance.yahoo.com/quote/FOCPX/performance/
[2] https://seekingalpha.com/article/4804280-fidelity-otc-portfolio-q2-2025-commentary