VIEW-Fidelity manager bets on Aussie consumer

HONG KONG (Reuters) - Fidelity money manager Paul Taylor, whose Australian equities fund beat the market for the past half decade, is betting on the country's consumer stocks to outperform, even as the financial crisis hits its economy.

His Fidelity Australian Equities Fund is overweight both consumer staple companies, a traditional defensive play when times are tough, as well as consumer cyclical shares that have already been slammed by expectations of bad economic news.

"If you look at the cycle, they're the first ones to go up, the first ones to bottom," he said in an interview.

"As interest rates come down the consumer cyclicals, now that the valuations have been hit, you'll actually probably see them doing well into a tough economic environment ... they're the first ones to lead that recovery."

Among Taylor's favourite consumer plays is Woolworths Ltd (WOW.AX), Australia's largest supermarket chain, which he says has a healthy balance sheet, good management team and repeatable strong earnings.

He is also overweight healthcare stocks, another traditional defensive play, where top picks include plasma products maker CSL Ltd (CSL.AX).

The Fidelity Australian Equities Fund has not been immune to the downturn, though it has outperformed.

The fund fell just over a third in the 12 months to end-October, compared with a 37.8 percent decline in Australia's S&P/ASX 200 index .AXJO on a total return basis, according to data from Lipper, a Thomson Reuters company.

And the fund has generated an annualised return of 15 percent since its launch in June 2003, compared with a 10 percent return for its benchmark, Fidelity data showed.