Contents
Fund Talk: The Manager's Overview
Performance
Fidelity®
Low-Priced Stock
Fund
Shareholder Update
July 31, 2004
Contents
Shareholder Update:
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Fund Talk
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The manager's review of fund
performance, strategy and outlook.
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Performance
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How the fund has done over time.
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Standard & Poor's, S&P and S&P 500 are registered service marks of The McGraw-Hill Companies, Inc. and have been licensed for use by Fidelity Distributors Corporation.
Other third party marks appearing herein are the property of their respective owners.
All other marks appearing herein are registered or unregistered trademarks or service marks of FMR Corp. or an affiliated company.
The views expressed in this update reflect those of the portfolio manager only through the end of the period as stated on the cover and do not necessarily represent the views of Fidelity
or any other person in the Fidelity organization. Any such views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to
update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as
an indication of trading intent on behalf of any Fidelity fund. The securities mentioned are not necessarily holdings invested in by the portfolio manager or FMR Corp. References to
specific company securities should not be construed as recommendations or investment advice.
Investments in smaller companies may involve greater risks than those in larger, more well known companies.
This shareholder update is not part of the fund's financial report and is submitted for the general
information of the shareholders of the fund. This update is not authorized for distribution to
prospective investors in the fund unless preceded or accompanied by an effective prospectus.
NOT FDIC INSURED · MAY LOSE VALUE · NO BANK GUARANTEE
Neither the fund nor Fidelity Distributors Corporation is a bank.
Fund Talk: The Manager's Overview
Market Recap
If investors have felt slightly dizzy of
late, it might be due to the equity
markets' reversal during the
12 months ending July 31, 2004. In
the first half of the period, stocks were
hopping due to optimism about the
recovering economy. In that time,
speculative, high-growth industries
such as semiconductors and
biotechnology led the charge. But in
the period's second half, the less
glamorous but steadier growth of
household and personal product
companies, among others, took on
more appeal. There were a number
of reasons for the turnaround:
near-record-high prices for oil and
gasoline; concerns about the effects
of interest rate hikes and rising
inflation on corporate profits; an
unsettled geopolitical environment;
and threats of terrorism, to name a
few. The equity markets' reversal is
well-illustrated by the returns of the
Standard & Poor's 500SM Index - a
popular benchmark of commonly
held stocks. In the first six months of
the period, the S&P 500® gained
15.23%. But the benchmark suffered
a loss of 1.78% in the second half of
the period. For the 12 months overall,
the S&P 500 climbed 13.17%.
Meanwhile, the Dow Jones Industrial
AverageSM - a performance
measure of 30 large-cap, blue-chip
stocks - rose 12.11%, and the
tech-heavy NASDAQ Composite®
Index returned 9.29%, despite losing
8.45% in the past six months.
An interview with Joel Tillinghast, Portfolio Manager of Fidelity® Low-Priced Stock Fund
Q. How did the fund perform, Joel?
A. The fund produced a return of 21.90% during the 12-month period ending July 31, 2004, outperforming the 17.06% return for the Russell 2000® Index and the 16.06%
advance of the LipperSM Small Cap Funds Average.
Q. What drove the fund's solid performance relative to its index during the past year?
A. Better returns among the fund's holdings in three sectors - consumer discretionary, financials and technology - were the principal reasons for its favorable results.
Q. Did you pursue any notable themes in the consumer discretionary sector?
A. Large homebuilders, such as D.R. Horton and U.K.-based Barratt Developments, continued to be an area of focus. These companies have been effective at buying large
portions of land at good prices, and they've demonstrated an ability to swiftly deal with the complicated process of working with local governments to obtain building permits.
Larger homebuilders also can achieve economies of scale, particularly with costly building materials. Despite concerns that rising interest rates could slow new home purchases
and the earnings of these companies, their stocks performed well. D.R. Horton produced surprisingly strong earnings growth, and its stock remained inexpensively valued.
Overweighting two retail stocks - British apparel retailer Next PLC and drug store operator CVS - also made a large contribution to the fund's performance. Both Next and
CVS consistently beat analysts' quarterly profit growth expectations.
Q. What was your strategy in the financials sector?
A. I sought a balance of companies that could benefit from declining interest rates and those whose businesses might improve in a climate of rising rates. The fund had some
success in both areas. Doral Financial, Puerto Rico's leading mortgage banker, saw its business flourish when historically low rates fueled brisk demand for home mortgages. On
the flip side, PMI Group, a provider of private mortgage insurance, benefited as domestic rates rose in 2004. Rising mortgage rates reduced the frequency of mortgage
refinancings, which, in turn, led to fewer policy cancellations. Overall, the fund was underweighted in the sector relative to the index largely because it's generally difficult to
find financials whose businesses don't suffer when rates increase.
Q. Credit card lender MBNA became the fund's second-largest holding. Why?
A. MBNA uses affinity marketing to attract customers affiliated with specific colleges, sports teams and other areas of personal interest, which gives the company a lower-risk
credit profile than its competitors because its customers tend to be more inclined to pay their bills on time. MBNA's credit quality improved and its quarterly earnings frequently
beat the market's expectations during the past year. That said, MBNA didn't meaningfully influence the fund's performance.
Q. In the tech sector, the fund's holdings produced a gain of more than 14%, while those in the index were down nearly 1% . . .
A. I identified a few successes that helped offset the sector's weakness. For example, Hong Kong-based Kingboard Chemical, a manufacturer of substrates for printed circuit
boards (PCB) used in mobile phones and computers, rallied sharply on rising demand for new PCB designs and favorable pricing trends. Logitech, a maker of computer mice,
generated strong earnings growth and its stock performed well. Focusing on tech services companies that tend to have recurring revenues, such as First Data, Affiliated
Computer Systems and Computer Sciences, also worked out favorably. Elsewhere, underweighting semiconductor stocks was helpful, as this was the market's worst-performing
industry.
Q. What investments proved disappointing?
A. Supermarket chain Safeway suffered from a labor strike that ended in February, which caused a percentage of its customers to patronize other food retailers. Several
health care positions declined due to the uncertainty about how the 2005 U.S. federal health care budget would be structured. Respiratory services supplier Lincare Holdings,
for example, faces a proposed change in Medicare legislation that would slash reimbursement payouts for its services. Two hospital operators - Health Management Associates
and Universal Health Services - were hurt by worries about bad debt and rising costs.
Q. What are your thoughts about the remainder of 2004?
A. One of my goals during the next several months is to reduce the fund's cash level, which proved to be a drag on fund performance during the past year. Fund sales were
further limited at the end of July, which should help stabilize the rate of net inflows. I successfully utilized the research coverage of our small-cap analyst team in London and
Asia during the past six months, and I expect to continue using them to broaden the scope of the fund's investment opportunities.
Fund Facts
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Goal: capital appreciation by
investing mainly in low-priced
common stocks ($35 or less at
time of purchase)
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Start date: December 27,
1989
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Size: as of July 31, 2004,
more than $30.3 billion
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Manager: Joel Tillinghast,
since 1989; analyst, various
industries, 1986-1989;
joined Fidelity in 1986
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Joel Tillinghast discusses
recent investment
opportunities:
"Given a positive economic backdrop
of rising corporate profits and low
interest rates, I added several
holdings during the past six months
that I felt could directly benefit from
increased corporate spending in the
United States. For example, I hold
railcar manufacturer Trinity, based on
my expectation that certain railroad
companies would likely purchase
more railcars to help reduce the
frequency of service interruptions
and to meet the growing demand for
coal, typically shipped via rails. I also
hold several positions in the
commercial construction area,
including lighting manufacturers
Acuity Brands and Genlyte Group,
metal building product maker NCI
Building Systems, and Cascade, a
parts manufacturer for the lift truck
industry. In general, corporate
spending on capital equipment has
improved somewhat, but it hasn't yet
reached the level that I - and most
investors - had expected. Because
it's likely that a percentage of the
expected corporate equipment
spending in 2004 has gone to
overseas competitors, I tried to
emphasize companies in domestic
manufacturing and distribution
businesses typically less susceptible
to foreign competition. Some of these
positions contributed to fund
performance, while others have yet to
play out."
Performance
The information provided in the tables below shows you the fund's performance, with comparisons over different time periods to the fund's relevant benchmarks -
including an appropriate index as well as groups of similar funds whose average returns are compiled and monitored by an independent mutual fund research
company. Seeing the returns over different time periods can help you assess the fund's performance against relevant measurements and across multiple market
environments. The performance information is presented in two ways - cumulative total returns and average annual total returns - and is further explained
below.*
Current performance may be higher or lower than the performance data quoted. For month-end performance figures, please visit fidelity.com/performance or call
Fidelity. The performance data featured represents past performance which is no guarantee of future results. Investment return and principal value will fluctuate;
therefore you may have a gain or loss when you sell your shares.
Fidelity Low-Priced Stock Fund has a 1.50% short-term trading fee on shares held less than 90 days.
Fiscal Periods Ended July 31, 2004
Cumulative Total Returns
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Past 1
year
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Past 5
years
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Past 10
years
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Fidelity Low-Priced Stock Fund
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21.90%
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103.58%
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349.28%
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Russell 2000 Index
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17.06%
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32.20%
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158.94%
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Lipper Small Cap Funds Average
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16.06%
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37.88%
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180.46%
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Lipper Mid-Cap Value Funds Average
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21.70%
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61.17%
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224.39%
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Cumulative total returns reflect performance over the period shown. This information represents returns as of the end of the fund's fiscal period as shown on the
cover of this shareholder update.
Average Annual Total Returns
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Past 1
year
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Past 5
years
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Past 10
years
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Fidelity Low-Priced Stock Fund
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21.90%
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15.28%
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16.21%
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Russell 2000 Index
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17.06%
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5.74%
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9.98%
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Lipper Small Cap Funds Average
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16.06%
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5.82%
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10.36%
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Lipper Mid-Cap Value Funds Average
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21.70%
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9.77%
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12.14%
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Average annual total returns represent just that - the average return on an annual basis for the fund and its benchmarks assuming consistent performance over
the period shown, based on the cumulative return and the length of the period. This information represents returns as of the end of the fund's fiscal period as shown
on the cover of this shareholder update.
Performance and disclosure information continued on next page.
Periods Ended June 30, 2004
Average Annual Total Returns
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Past 1
year
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Past 5
years
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Past 10
years
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Fidelity Low-Priced Stock Fund
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32.43%
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15.84%
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16.89%
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Russell 2000 Index
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33.37%
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6.63%
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10.93%
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Lipper Small Cap Funds Average
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30.21%
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7.02%
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11.21%
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Lipper Mid-Cap Value Funds Average
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30.90%
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10.14%
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12.94%
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This information shows the returns of the fund, its index, and its Lipper averages for different time periods through the end of the most recent calendar quarter, as opposed
to through the end of the fund's fiscal period as shown on the previous page.
Lipper calculates average annual total returns by annualizing each fund's total return, then taking an arithmetic average. This may produce a different figure than obtained by
averaging the cumulative total returns and annualizing the result.
See next page for index information.
* Total returns are historical and include changes in share price and reinvestment of dividends and capital gains, if any.
Past performance is no guarantee of future results.
For complete fund holdings, please see the Investments section of the Annual Report, which is attached to, but not part of, this Shareholder Update.
It is not possible to invest directly in an index. All indices represented are unmanaged.
All indices include reinvestment of dividends and interest income unless otherwise noted.
The Standard & Poor's 500 Index (S&P 500) is a market capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity
performance.
The NASDAQ Composite Index is a market capitalization-weighted index that is designed to represent the performance of the National Market System which includes stocks traded only over-the-counter
and not on an exchange.
The Dow Jones Industrial Average, published by Dow Jones & Company, is a price-weighted index that serves as a measure of the entire U.S. market. The index comprises 30 actively traded stocks, covering
such diverse industries as financial services, technology, retail, entertainment, and consumer goods.
Russell 2000 Index is a market capitalization-weighted index of the stocks of the 2,000 smallest companies included in the 3,000 largest U.S. domiciled companies.
The Lipper Small Cap Funds Average reflects the performance of mutual funds with similar objectives tracked by Lipper Inc. and excludes the effect of sales charges.
The Lipper Mid-Cap Value Funds Average reflects the performance of mutual funds with similar portfolio characteristics and capitalization tracked by Lipper Inc. and excludes the effect of sales
charges.
LPS-SHU-0904 382583
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