“In periods such as the Global Financial Crisis (GFC), when it comes to stock selection it is all about the balance sheet” says Paul Taylor, Fidelity’s Head of Australian Equities.
Sydney Airport is a stock that demonstrates the true depth of research Fidelity will undertake to understand the variables driving a company’s financial viability. Throughout the GFC, markets were concerned that Sydney Airport were over-leveraged and unable to sustain their borrowings through this period of dislocation. The stock price was falling and markets were nervous.
Fidelity’s proprietary research showed that for Sydney Airport to default, the following four conditions would have to occur concurrently:
- Passenger traffic had to decline by 35% year on year
- Retail sales per passenger had to decline by 25%
- Property rents had to decline by 25%
- Car park sales per passenger had to decline by 30%
No single database worldwide had this intelligence.
In this short video, Paul Taylor & Jason Billings talk through their theory behind the stock and the team’s analysis of data from the world’s 57 international airports to determine whether they could hold their position in the stock during this uncertain period.
The outcome? Not only did we retain our position in the company, but we built our holdings during the period which significantly benefited investors in the fund.
This video is an excellent demonstration of the Fidelity research process that we are so proud of, and is a great example to show to clients invested in our funds.
Sydney Airport is currently a holding in the Fidelity Australian Equities Fund.*
