This article first appeared in Livewire on 10 October 2025
Portfolio Manager of the Fidelity Future Leaders Fund and Co-Portfolio Manager of the Fidelity Global Future Leaders Fund and Active ETF (ASX:FCAP), James Abela, chats with Livewire to discuss where tomorrow’s leaders will emerge and why valuation discipline matters more than ever in this market.
Please note this interview was filmed 30th September, 2025.
What defines a “future leader” in today’s market?
Portfolio manager James Abela of Fidelity International, who manages the Fidelity Future Leaders Fund and co-manages the Fidelity Global Future Leaders Fund and Active ETF (ASX: FCAP) has spent his career identifying the market’s potential triple threats. The answer hasn’t changed much over time.
“Future leaders can come from earnings lifting up, valuation lifting up, or sentiment lifting up,” Abela says. “Typically, you have one or two of those, but sometimes you do have all three, and that will lead to valuations lifting up quite substantially.”
For Abela, this interplay between earnings, sentiment and valuation underpins how he identifies the aces across his Australian and global portfolios.
For an in-depth breakdown, watch the interview above or read a short summary below.
The gap between data and narrative
When markets stretch too far in one direction, as we are seeing in play right now, the disconnect between fundamentals and the storyline widens. According to Abela, that’s exactly where investors need to pay attention.
“The data and the narrative generally go together, but when they get extreme - like in today’s environment - risk tolerance is really high, concerns are very low, and the perception of the cost of capital is very low,” he explains.
This tends to happen in “quality” and “momentum” stocks, where investors start pricing for perfection.
“You might have a business that’s normally on 25 to 30 times earnings, growing 10 to 15%, with returns on capital in the top quartile. But then the market gets so excited about the growth potential and the total addressable market, that multiples go from 20 to 30, 50, to over 100 times.”
Abela points to Temple & Webster (ASX: TPW) and Pro Medicus (ASX: PME) as examples of high-return businesses that the market has rewarded for potential - sometimes too generously.
On the other end of the spectrum, momentum themes can lift entire sectors, regardless of quality.
“Today, you’ve got gold and defence being two very strong momentum themes. Some are loss-making, but they’re multibillion-dollar companies. And when the thematic is strong, even low-grade or short-life miners get carried up together with high-quality names,” Abela explains.
Lessons from a decade of future leaders
Abela has run the Fidelity Future Leaders Fund since 2013 and co-managed its global counterpart, the Fidelity Global Future Leaders Fund for five years. Across both, valuation discipline has become increasingly central to his process.
When asked if there was a moment he could point to that triggered an evolution in thinking, he points to 2016–17, where “the Fidelity Future Leaders Fund went from outperforming by 15% to underperforming by 15% within two quarters. That was because of a significant underweight in resources and energy, which then went up nearly 100% over the next 18 months,” he recalls.
That experience reshaped how he manages valuation risk. “Since then, I’ve introduced a lot more valuation discipline and track valuations every single month.”
The same lesson applied globally during 2022–23 in the Fidelity Global Future Leaders Fund.
“Technology valuations got very, very high, and AI started to come out as a big theme. A lot of companies had what I call ‘bleeding earnings’ and slow multiple compression. So now we track earnings and valuations for every stock every quarter.”
This discipline, he says, helps identify when strong businesses are quietly losing investor confidence or when they’re gaining it.
Australia vs the world
“Australia is much more a momentum market. It’s narrow and emotional,” Abela says. “Global markets are much more rational and valuation disciplined.”
He backs that up with data. “When we did the 25-year back test, Australia’s mix was roughly 40% quality, 30% momentum, 20% transition, and 10% value.
Globally, it’s the opposite - quality, value, transition, momentum.
"It's a very broad, deep, wide, well-informed marketplace. Momentum just doesn't work. You don't have that many big momentum cheerleading sectors or stocks that really take over the index, which you can do in the Australian market. It is a narrow and shallow market."
This difference affects positioning. “In Australia, if you want exposure to gold or defence, there’s only a handful of names. Globally, the breadth of opportunity means you don’t have to chase momentum.”
Wins, losses and lessons
Abela’s standout winner in recent years has been Applovin (NASDAQ: APP), an ad-tech company that has seen a four- to five-fold increase in 12–18 months.
After a short report where they were accused of violating Apple platform regulations, "they had very strong support from Microsoft, Meta, and Google to say what they're doing is actually groundbreaking. It's really innovative. The developers are admired in that business. And since then, their share prices has basically doubled back to from where it was peak. It's now gone above that peak, and it's now actually entered the S&P 500."
The contrasting story is Pinterest (NYSE: PINS), a stock that “had that bleeding problem - earnings and multiples coming down.”
Pinterest was supposed to lead innovation in shopping integration, explains Abela, but Google and others followed suit faster than expected. Its duration shifted from long to mid-range, and the multiple came down much faster than earnings.
“That lesson is really to watch out for that duration shift, which you see in the multiple coming down. So that's the two sides of the same sort of coin. You've got to look for the same things. And the rewards are opposite. One's halving and one's going up many times.”
Positioning for the current environment
Both Abela’s funds are overweight technology. “Technology generally has a much easier way to get around high inflation, high costs, and high labour,” he says. “They have low inventory, no warehouses, everything is digital. It's a digital footprint where things can happen very quickly."
He focuses on capital-light, high-return businesses - “beautiful compounders” - across technology, financials, consumer, and industrials. Healthcare, he notes, is tougher, but still part of the opportunity set.
The importance of trust
Interestingly, ResMed (ASX: RMD) is one of the top ten holdings in the Global Future Leaders Fund - an Aussie name among global peers.
“We bought during the GLP-1 peak fear when people thought weight-loss drugs would shrink the CPAP market,” he says. “That didn’t transpire. It’s still a beautiful compounder. Founder-led, high return, high R&D spend, and one of only three global players.”
He draws parallels with Fisher & Paykel (ASX: FPH), which sits in the top 10 of the Australian fund. “If you’re in hospital and need oxygen, there are only three machines in the world your doctor will trust. These are critical tools solving critical problems.”
Both, he says, are part of what he calls the “trust industries” - medicine, engineering, finance, and tech - where customers rely on near-perfect reliability.
Where the next leaders will emerge
“It really has to be technology,” Abela says. “Consumer tech, health tech, fintech, software, hardware, and services - technology is ubiquitous now. It’s where the jobs, consumption, and innovation are going.”
Whether it’s AI, digital infrastructure, or next-generation healthcare, Abela’s message to investors is to look beyond the hype and focus on the fundamentals - earnings, sentiment, and valuation.
Those, after all, are what it takes to identify the future leaders of tomorrow’s markets.
