2026 fund picks: Fidelity Special Situations

One of Tom Stevenson’s fund picks for 2026 is Fidelity Special Situations, which offers exposure to a portfolio of unloved UK stocks where the managers believe there is potential for recovery.¹ Despite recent strong returns, the London stock market still appears cheap relative to global peers  ̶­  and reasonable in absolute terms  ̶  making it an ideal hunting ground for these sorts of turnaround opportunities.²

Lead manager Alex Wright is a highly experienced investor who has run this mandate for many years  ̶  an important advantage for a contrarian strategy of this kind. He also benefits from a large, high-quality team of company analysts, hence its inclusion in Fidelity’s Select 50 list of handpicked funds.³

Objective and approach

Fidelity Special Situations aims to deliver long-term capital growth over periods of five years or more by investing at least 70% of the assets in UK companies. The team follows a contrarian investment philosophy, focusing on unloved and undervalued stocks where the market has overlooked the potential for recovery.⁴

Wright and co-manager Jonathan Winton target “special situations”: companies that have experienced prolonged underperformance but where further downside appears limited. Their approach is unconstrained, allowing them to pursue opportunities wherever they arise,⁵ though the portfolio retains a structural bias towards medium- and smaller-sized businesses.⁶

Speaking recently, Wright said that the UK enters the year from a position of strength.

“We have been finding value further down the market cap spectrum as large-cap companies are trading close to their long-term averages, with the FTSE 100 on 14.2 times forward price to earnings. Whereas mid-cap and small-cap companies remain materially undervalued, trading at 11.4 times and 10.8 times forward earnings respectively.”⁷

The underlying portfolio

At the end of November, the fund had 92 positions, with the ten largest accounting for 34% of the assets. These included well-known names such as Standard Chartered, Aviva, British American Tobacco, and Lloyds Bank, as well some less familiar companies.⁸

Top 10 holdings

1. Standard Chartered
2. DCC
3. Aviva
4. British American Tobacco
5. TotalEnergies
6. Lloyds Banking Group
7. NatWest Group
8. AstraZeneca
9. SSE
10. AIB Group

Source: Fidelity Special Situations Facsheet, 30 November 2025

A total of 84.3% of the portfolio was invested in the UK, with the remainder overseas. Relative to the FTSE All-Share benchmark, the fund was 45.6% underweight large-cap FTSE 100 stocks, while being materially overweight mid-cap and non FTSE companies.⁹

“While our investment process is driven by bottom-up stock selection, we categorise the market into super sectors to articulate positioning changes. Financials remain the largest absolute sector weight in the portfolio, but this exposure is highly diversified across a variety of sub-sectors, geographies and business models,” said Wright.¹⁰

Performance and risk

Over the past five years, the W Accumulation share class has delivered an annualised return of 14.6%, well ahead of the 12.1% achieved by the index. This places the fund in the top quartile of the 179 peers in the sector. It has also comfortably outperformed the benchmark since the performance commencement date of 15 October 2012.¹¹ Please remember past performance is not a reliable indicator of future returns.

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This fund can invest in overseas markets and so the value of investments can be affected by changes in currency exchange rates. Before investing, please read the relevant key information document which contains important information about each investment trust. 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. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. 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 one of Fidelity’s advisers or an authorised financial adviser of your choice.