I took a closer look at the $FYEQ (-0.25%) Fidelity Emerging Markets Quality Income more closely. It's the "best of both worlds", so to speak: 30% tech power and yet at least 3% dividends.
1. the "shovel makers" behind the AI rally
Many people only look at American stocks, but the FYEQ focuses on the companies that keep everything running in the background. This is the perfect mix of substance and growth.
I've just briefly explained the top 3 here, I think they describe quite well what the ETF represents:
- Samsung Electro-Mechanics: build the passive components (MLCCs) and substrates without which no AI server can function. The hardware basis of digitization.
- Delta Electronics: The global market leader in switching power supplies (approx. 50% market share!). When tech giants such as Nvidia or Meta build huge AI data centers, Delta supplies the efficient power modules and specialized cooling systems. No high-end server can run without their power supply.
- Leeno Industrial: A hidden champion for semiconductor test pins. Before a chip is installed, it goes through Leeno hardware. More "shovel business" is not possible.
2. strategy & selection
The ETF sorts strictly according to three quality criteria:
1. return on equity (ROE): management efficiency.
2. free cash flow margin: real money for dividends.
3. cash flow stability: typical emerging markets dividend traps with one-off high profits are weeded out.
The portfolio is completely updated annually in February.
3. the Nasdaq comparison:
How does it perform?
Many people ask themselves: Can the ETF keep up with the Nasdaq? You have to look at it realistically:
- In good phases (bull market): When US tech giants like Nvidia or Apple take off, the Nasdaq pulls away. Due to its focus on dividends, the FYEQ tends to be the "slowest" participant, but it has a fundamentally healthier valuation.
- In bad phases (bear market): Here the FYEQ is the rock in the surf. While the Nasdaq corrects massively on interest rate fears, the EM quality stocks and the dividends of over 3.2% cushion the portfolio much better. It is not so much a racing car, but a high-quality SUV for rough terrain.
4. ✅ 🚫Advantages & disadvantages in a nutshell
The advantages:
- Stable yields: Almost always > 3.2% yield since inception.
- AI fantasy: High tech component (30%) with a focus on hardware suppliers.
- Risk protection: Quality filter reliably sorts out "junk stocks" and typical EM dividend traps.
The disadvantages:
- Costs: the TER of 0.50% is rather on the high end in an EM comparison.
- Size: With a fund volume of around € 188 million, it is still relatively small.
- Performance lag: It lags behind the Nasdaq during extreme tech hypes.
5. conclusion
The FYEQ is perfect for anyone who wants EM growth and AI scoops in their portfolio but doesn't want the extreme volatility of pure growth stocks. A strong anchor with cash flow! 🚀
