A Longtime Fidelity Manager Sold GameStop, and Has Some Regrets

Joel Tillinghast has managed the Fidelity Low-Priced Stock Fund since it was created about 32 years ago, hunting for companies with shares that trade at bargain prices relative to their earnings potential. In 2020, a suffering video-game retailer called GameStop Corp. fit that bill.

So when the company’s shares suddenly started moving higher at the start of the year, he did what his more than three decades of value-investing experience told him to do: he sold the fund’s entire stake for a profit. And yet, after seeing the staying power of the rally in meme stocks fueled by Reddit forums, even Tillinghast has some regrets.

“Sometimes I multiply the difference between the sale price and the current market price by the number of shares that I had, and of course I kick myself,” Tillinghast said in an interview on Bloomberg Radio’s Baystate Business. “But the comforting thing of being a value investor is I also feel like, well, I sold it for somewhat more than my estimate of fair value and that’s what I meant to do.”

The $33.5 billion Fidelity fund had about 2 million shares of GameStop at the end of October, regulatory filings show. That’s when the Grapevine, Texas-based company’s stock traded at just above $10. By the end of January, at which point the fund had exited its position, GameStop had reached as high as $483. It hasn’t climbed back to that level since then, closing at $220.40 on Tuesday.

Tillinghast didn’t say at what price he sold. However, another fund that he manages, the $14 billion Fidelity Series Intrinsic Opportunities Fund, held 6.8 million GameStop shares as of Oct. 30 that were valued at $71.2 million, filings show. It sold the entire stake by the end of January for a total of $333.8 million, or about $49.08 a share.

“It felt like when the stock was in the single-digits, there was no question that the stock was undervalued, even though it was fundamentally challenged and they were lagging in their efforts to market digitally,” Tillinghast said of GameStop. “But when the stock rallied above my estimate of fair value, I sold it.”

Investors continue to grapple with what lessons, if any, to take away from the runaway rally in GameStop shares that astonished Wall Street. Since then, message boards on Reddit helped push up the price of other favorites like AMC Entertainment Holdings Inc. Both GameStop and AMC have taken advantage of retail-trader enthusiasm to raise money by selling more shares.

So far this year the Fidelity low-priced fund is up about 19%, beating 84% of its peers. Over a five-year period it ranks in the 27th percentile, according to data compiled by Bloomberg.

Tillinghast’s exit from GameStop didn’t stop him from winning Morningstar Inc.’s outstanding portfolio manager award this week. Robby Greengold, a Morningstar strategist, noted in a release that Tillinghast “doesn’t chase fads.”

©2021 Bloomberg L.P.

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