Despite a challenging environment for small-cap equities in the initial quarter of 2025, the Fidelity Small Cap Value Fund demonstrated resilience, with its Retail Class shares achieving a return of -5.70%. This performance notably surpassed the Russell 2000® Value Index, which registered a decline of -7.74% during the same period. This relative strength was largely attributable to adept security selection, particularly within the industrials, financials, and information technology sectors, underscoring the effectiveness of the fund's investment strategy.

The fund's investment philosophy centers on identifying high-quality, undervalued small-capitalization companies, emphasizing a robust margin of safety. This disciplined approach to portfolio construction aims to deliver consistent long-term outperformance. In the face of recent market turbulence, the fund has capitalized on opportunities to enhance the overall quality of its holdings, strategically increasing exposure to sectors such as consumer discretionary and building products, where valuations have become particularly attractive.

While recognizing the persistent near-term market uncertainties, the fund remains optimistic about its long-term return potential. This positive outlook is underpinned by the current favorable valuations within the small-cap segment and the fund’s proven stock-picking capabilities. By focusing on fundamental value and strategic asset allocation, the Fidelity Small Cap Value Fund is well-positioned to navigate market fluctuations and generate sustained growth for its investors.

The proactive and adaptive investment approach demonstrated by the Fidelity Small Cap Value Fund serves as a testament to the benefits of diligence and strategic foresight in navigating complex financial landscapes. In an ever-evolving market, a commitment to identifying intrinsic value and maintaining a disciplined investment framework not only mitigates risks but also fosters opportunities for significant long-term capital appreciation, benefiting investors and contributing to a more robust financial future.

In the second quarter of 2025, the Fidelity Value Discovery Fund encountered a period of slight underperformance relative to its benchmark. This outcome was primarily influenced by specific sector choices and the individual trajectories of certain portfolio assets. Despite this, the fund remains steadfast in its core investment philosophy, which centers on identifying and acquiring stakes in companies that exhibit strong financial health, durable competitive advantages, and compelling valuations. This strategy transcends the simple pursuit of inexpensive stocks, emphasizing intrinsic quality and long-term potential.

Reflecting the dynamic market environment, the fund implemented several targeted adjustments to its portfolio composition. These included a measured reduction in holdings within the utilities and consumer staples sectors, balanced by a strategic increase in exposure to industrial and communication services companies. These shifts were a direct response to recent market volatility, aiming to position the fund advantageously. The commitment to a disciplined value-oriented approach persists, with a strong focus on preserving capital and generating sustainable returns for investors over an extended horizon.

Fund Performance and Market Dynamics

During the second quarter of 2025, the Fidelity Value Discovery Fund's Retail Class shares yielded a return of 2.92%, trailing the Russell 3000 Value Index's gain of 3.84%. This performance gap highlights the nuanced interplay between sector positioning and the distinct outcomes of individual investments within a volatile market. The fund's managers diligently analyze market signals to make informed decisions that align with their value-driven mandate, even when short-term returns diverge from the benchmark.

Large-cap value equities collectively advanced by 3.84% during this period, signifying a broader market trend that the fund aims to harness while adhering to its strict investment criteria. The fund’s rigorous selection process involves identifying companies with robust business fundamentals and attractive valuations, rather than simply chasing stocks with low price-to-earnings ratios. This methodical approach is designed to mitigate risks and enhance long-term capital appreciation, even if it means temporary deviations from benchmark performance due to specific market conditions or sector rotations.

Strategic Portfolio Adjustments

Responding to shifting market conditions and a commitment to long-term value creation, the Fidelity Value Discovery Fund made calculated adjustments to its investment holdings. These included a tactical reduction in positions within the utilities and consumer staples sectors, areas that may have presented limited growth opportunities or increased vulnerability in the prevailing economic climate. Conversely, the fund strategically bolstered its exposure to the industrial and communication services sectors. These shifts were motivated by a desire to capitalize on emerging opportunities and enhance the portfolio's resilience against future market fluctuations, following a period of heightened volatility.

The core of the fund’s strategy remains its unwavering focus on businesses possessing strong competitive moats and a consistent ability to generate above-average returns on invested capital. This disciplined methodology, which prioritizes intrinsic value and a margin of safety, is applied consistently, irrespective of current market valuations. The fund managers believe that this steadfast adherence to their established principles will ultimately lead to superior long-term results, ensuring that capital is allocated to high-quality assets capable of enduring various economic cycles and delivering sustainable growth for shareholders.