The Fund That Beats the Market: Dmitry Solomakhin’s Successful Strategy.

Going against the grain and still winning is a strategy that works for Dmitry Solomakhin of Fidelity International. His next bet is on stocks that have been crushed by the rise of artificial intelligence.
For years, Solomakhin has been betting on companies experiencing operational or financial problems.
Positions such as Rolls-Royce Holdings Plc have paid off handsomely, with its $1.1 billion fund under management beating 99% of its peers over the past three months, mirroring its similar performance over the same number of years.
More recently, he has begun picking companies that appear to be among the losers from the Nvidia Corp.-driven. AI obsession.
“I call the deal book the book of disappointments,” Solomakhin said in an interview. “I’m looking for companies that are completely kicked out. What I’m trying to do is find the very rare cases where the market is wrong.

Rolls-Royce, the fund’s largest position at the end of April, serves as proof of Solomakhin’s strategy. The UK engine maker struggled for years to overcome supply chain problems caused by Covid before a transformation program and management changes led to almost 400% growth from the end of 2022.
“I held the position for many years and it was painful,” he said. “Now the wait has been worth it, but I think this is not the end of the movement”
Solomakhin, who joined Fidelity in 2006 as a capital markets analyst for Europe and has run the global long-short fund since 2012, said he holds stocks for an average of three to five years. The portfolio returned 19% last year, on par with the return of the MSCI All-Country World Index.

One recent bet is U.S.-based Concentrix Corp., a chatbot operator that has tumbled 38% this year on the expanding AI continuum.
“People are saying that because of the growth of the AI ​​industry, you don’t need this type of service anymore,” Solomakhin said. “It’s a very general statement and the reality is different. The market is saying this is the end of the company, but I’m not inclined to agree 100%.”
The decline in Concentrix shares reflected an “overexposed reaction” to the impact of AI, the company said.
“We believe investors are misattributing the impact of the weaker macroeconomic environment on our Gen AI revenue,” a spokesperson said.
Other holdings include British defense firm Babcock International Group Plc, which has recovered more than 170% from its January 2021 low.