Investing Amid Tariffs: Strategies for how I'm Navigating Uncertainty

Key Takeaways

• Tariff policies and policy uncertainty necessitate adaptive strategies from fund managers.

• Portfolio managers, including Sonu Kalra of Fidelity Blue Chip Growth, have identified potential opportunities amidst tariff-related volatility.

• Artificial intelligence (AI) has initiated the fourth major technological innovation cycle of the millennium.

Investing inherently involves some level of uncertainty, but this year has presented investors with particularly unexpected challenges.

The announcement in early April regarding extensive tariffs on imported goods caused significant volatility in the stock market. Contrary to many analysts' expectations, stock market indexes subsequently recovered and have reached new record highs.

Initially, numerous investors intended to wait for more definitive information on the specifics and levels of the new tariffs to assess their impact on corporate profits. However, as uncertainty persists and the market continues to advance, it has become evident that investors cannot afford to remain on the sidelines. The question remains: how can investors succeed in a constantly changing environment?

Fidelity^® Blue Chip Growth ETF (FBCG) and the Fidelity^® Blue Chip Growth Fund (FBGRX) present unique opportunities during periods of heightened volatility, such as April 2025. These moments allow for strategic portfolio enhancements.

When preferred stocks reach downside price targets and the company's fundamentals remain robust, I may consider investing in stocks previously avoided due to high valuations.

Through comprehensive research, I have identified companies that are less susceptible to tariffs or unaffected altogether. For instance, I focus on companies with strong brand recognition, as they are better positioned to transfer costs and mitigate adverse effects from tariffs.

The top 10 holdings of the Fidelity^® Blue Chip Growth ETF (FBCG) as of May 31, 2025, are as follows:

• 13.9% – NVIDIA Corp. (NVDA)

• 9.4% – Apple Inc. (AAPL)

• 9.1% – Amazon Inc. (AMZN)

• 8.0% – Microsoft Corp. (MSFT)

• 5.2% – Meta Platforms Inc. Class A (META)

• 4.9% – Alphabet Inc. Class A (GOOGL)

• 3.5% – Netflix Inc. (NFLX)

• 2.3% – Eli Lilly and Co. (LLY)

• 2.2% – Broadcom Inc. (AVGO)

• 1.6% – Marvell Technology Inc. (MRVL)

(Refer to the most recent ETF information.)

Note: This ETF differs from traditional ETFs. Traditional ETFs disclose their holdings daily, whereas this ETF does not, potentially introducing additional investment risks. For instance, trading shares may incur higher costs due to limited information available to traders, resulting in price discrepancies between the ETF's market price and its portfolio value. Such discrepancies may be more pronounced compared to other ETFs, especially in volatile market conditions. The ETF provides a daily "Tracking Basket" on its website to facilitate trading, but this does not represent the ETF's actual portfolio. The differences between this ETF and others could offer advantages, such as reduced risks of strategy replication by other traders, potentially enhancing performance. However, if traders manage to predict or replicate the ETF's strategy, it could negatively impact performance.

Seeking tariff-proof business models

One illustration of this strategy has been SharkNinja (SN). Investors punished the stock in April due to its longtime manufacturing reliance on Asia—particularly China, which is in the crosshairs of new tariff policy. But Kalra observed that the innovative Boston-based company of kitchen appliances was rapidly moving production out of China. He also saw that its strong brand allowed it to pass on cost increases by effectively raising prices (which it could accomplish by slashing retail discounts, rather than by raising sticker prices), and that it was expanding outside its core kitchen category into new lines of grills and beauty and skin-care products.

Another potential way to beat tariff uncertainty? Look for companies that don’t deal in physical wares, such as service companies with subscription-based models. Kalra highlights streaming giant Netflix (NFLX) as an example of a business model that may be relatively insulated from tariff pressures. Netflix has done a tremendous job in becoming a leader in video-on-demand globally I feel.

Maintaining a long-term outlook is essential for navigating periods of headline uncertainty, where news can change rapidly. Tariffs represent a one-time impact on the economy. In a year's time, we may have moved past this issue.

The top 10 holdings of the Fidelity^® Blue Chip Growth Fund (FBGRX) as of June 30, 2025, are as follows:

• 15.2% – NVIDIA Corp. (NVDA)

• 8.6% – Amazon Inc. (AMZN)

• 8.1% – Microsoft Corp. (MSFT)

• 7.9% – Apple Inc. (AAPL)

• 5.5% – Meta Platforms Inc. Class A (META)

• 4.7% – Alphabet Inc. Class A (GOOGL)

• 3.6% – Netflix Inc. (NFLX)

• 2.6% – Broadcom Inc. (AVGO)

• 2.2% – Eli Lilly and Co. (LLY)

• 1.9% – Marvell Technology Inc. (MRVL)

Seeking Robust Competitive Advantages

Regardless of the current news cycle or economic conditions, I maintain a steadfast investment philosophy and process. My focus is on identifying companies operating in expansive, underdeveloped markets where there is a mispricing of not only the growth rate but also the sustainability and longevity of that growth.

Specifically, my research target companies with the potential to maintain earnings growth of 10% or more over a period of 3 to 5 years. Historically, achieving this level of earnings growth has been a strong indicator of future outperformance and helps narrow down the pool of viable investment candidates.

This 10% growth benchmark serves as a valuable criterion in a market abundant with opportunities.

This approach directs me towards companies in sectors with significant barriers to entry, possessing strong competitive advantages, pricing power, and the capability to leverage long-term trends. I believe a growth-oriented blue-chip company should have a compelling business model that facilitates sustained profitability. I seek out businesses with substantial free cash flow or the potential to generate it, along with high returns on equity and capital.

A crucial aspect of the analysis is evaluating whether a company is gaining or losing market share. If a company begins to show signs of plateauing or slightly declining market share, it raises a cautionary signal, prompting consideration of reducing the investment.

Quarterly earnings reports serve as a performance evaluation. The market assesses the company, and I conduct my own evaluation through in-depth research. Occasionally, these assessments align, but divergences can occur. For instance, the market might penalize a company for a delayed product launch due to temporary supply chain issues. If the fundamentals remain strong, I might view this as a buying opportunity.

Long-term Growth Drivers

I also identify promising stocks by aligning with enduring trends.

For instance, over a decade ago, Fidelity analysts noted a steady increase in e-commerce penetration, marking a structural shift from traditional retail. Amazon (AMZN) has been a core portfolio holding, offering a compelling value proposition of selection, price, and convenience as it continues to expand domestically and internationally.

I estimate that e-commerce accounts for 17% to 18% of retail revenue in the US, with growth potential. In emerging markets like China, where traditional retail infrastructure was less developed, e-commerce penetration is close to 30%.

Another significant trend is digital advertising, shifting from print and broadcast to digital media.

A fundamental principle I learned is that advertising dollars follow consumer attention. As attention shifted from traditional to digital media, so did advertising spend. Major holdings in the Fidelity Blue Chip Growth ETF and Fidelity Blue Chip Growth Fund, such as Meta Platforms (META) and Alphabet (GOOGL), have greatly benefited from this shift.

AI: The Fourth Major Technological Wave

Artificial intelligence is a significant current theme in my investment strategy. NVIDIA (NVDA), the leading chipmaker for generative AI, is a top holding in both the ETF and mutual fund.

I view generative AI as the fourth major technological innovation cycle of the past three decades. The first was the development of the internet in the late 1990s and early 2000s; the second was the advent of the smartphone, transforming daily life and consumption habits; and the third was the migration of IT infrastructures to the cloud.

While there is ongoing debate about the significance of generative AI, I am confident it will be transformative, akin to the internet and smartphones. However, it will likely take years to fully unfold and may evolve unpredictably, similar to past technological cycles.

Predicting the broader impacts of generative AI is challenging. It resembles the early days of the internet, now integral to every business. We are in the early stages of adoption, making this an exciting time in my view.

Best Regards,

Stock Market Charlie