CRUX European Special Situations Fund

Daniel Lane

Daniel Lane - Fidelity Personal Investing

“The sort of company head we love to back is someone who eats their own cooking bigtime,” says Richard Pease, co-manager of the FP CRUX European Special Situations Fund, a Fidelity Select 50 fund.

While Pease and co-manager James Milne start their company analysis from the ground-up, examining the fundamental building blocks of European businesses, a management team with skin in the game can really grab their attention.

One company fitting this description is the fund’s top holding Aroundtown. Headquartered in Luxembourg, the company specialises in buying commercial property from distressed sellers with a view to generating income in central locations in top tier cities primarily in Germany and the Netherlands.

Pease explains the reasoning behind the company’s inclusion in the fund: “Aroundtown is run by a very interesting character called Yakir Gabay. He personally has just under €3bn in the business, which has got a market cap of about €7.5bn and he hasn’t sold a share.

“I was talking to someone in his team who told me he doesn’t even pay himself and he doesn’t claim expenses. That’s just the sort of guy we love to back actually - somebody who has a lot of confidence in his own business and for very good reason I think. I’m always a great believer in people who back their own ventures.”

For the team at Crux, it has to be more than just strong management though. Pease explains: “I think the market doesn’t seem to appreciate sometimes the longer-term potential that businesses like this have. Despite it performing well last year and this year it still doesn’t look expensive and we’re getting a good dividend yield.”

The company’s reach beyond its immediate borders is also a common characteristic in the fund, as the managers look to reduce the effect one single country can have on the success of the whole operation.

Milne explains, “We try to avoid domestic plays so we tend to have either global or pan-European businesses, just because if something happens in the politics or the economics in one area it will affect 100% of a domestic business. For example, in the case of ISS, one of our outsourcers, the largest country in its portfolio is France which makes up only 9% of its sales. 20% of this is the government so if something happens to that particular client it doesn’t affect the overall business.”

Well-run companies with high market share and resilient sales growth also pique the managers’ interest. French multi-national flooring company Tarkett falls into this category for the managers, and despite the shares hitting a rough patch, they are prepared to keep it in the portfolio.

Milne explains, “If you look at the valuation of Tarkett we feel if one can hold one’s nerves and be a little bit more patient we should be very well-rewarded on these sorts of stories. 80% of its revenue is from repair, maintenance and improvements and in any given year companies will always need to look at their flooring. Offices and shops like Zara, who obviously want to have nice floor that isn’t worn out, tend to replace it quite frequently.”

For more on the FP CRUX European Special Situations Fund visit the fund fact sheet.

Watch our interview with Richard Pease below

Important information

The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.