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.

Building a properly diversified portfolio can be trickier than it sounds as many actively managed funds tend to stick closely to their benchmark, but that is certainly not the case with the Fidelity Special Values investment trust. Its experienced manager, Alex Wright, has established an excellent track record by taking a contrarian approach to stock selection, with the resulting exposure being markedly different to the rest of the sector.

Wright and his team look for companies that are out of favour, yet have the potential to turn things around. This gives the fund a value and small/mid-cap bias relative to its peers, which has helped the long-term performance and made it a valuable diversifier.

These qualities have not gone unnoticed, with Fidelity Special Values recently being voted Investment Week’s investment company of the year, in the UK All Companies sector. This was in addition to winning the Citywire Best UK All Companies trust award.

The recently released annual results for the year to the end of August show a net asset value (NAV) total return of 5.9%, which was ahead of the 5.2% increase in the FTSE All-Share benchmark. Please remember past performance is not a reliable indicator of future returns.

According to the latest available data, the two largest sector exposures are financials and industrials that make up 47.2% of the portfolio, with Wright favouring companies with strong balance sheets and low debt levels.

Fidelity Special Values top 10 holdings

  1. CFD on AIB Group
  2. Imperial Brands
  3. Roche Holding
  4. DCC
  5. Phoenix Group Holdings
  6. Aviva
  7. Babcock International
  8. MITIE Group
  9. OMV
  10. NatWest Group

Source: Fidelity International, at 30 November 2023

Writing in the accounts, he said that UK valuations are pricing in extreme pessimism, with the domestic market trading on 10.9 times 2024 earnings, which compares to 13.4 times for Europe and 18.6 times for the US. Fidelity Special Values is even cheaper at 7.7 times and is close to a ten year low.1

Wright believes that the current market environment creates further scope for his style of investing to outperform and says that “we are in the very early stages of a long-term rally in value stocks”.

The broker Numis describe Fidelity Special Values’ track record as exceptional, with NAV total returns of 90% versus 60% for the FTSE All-Share over the last ten years2. They rate the manager highly and admire his investment approach, which has a strong contrarian flavour, looking for unloved stocks where the downside is limited and there is a catalyst for change.

Source: Yahoo Finance from 29.11.18 to 29.11.23 Basis: Share price in GBP. Excludes initial charge. Past performance is not a reliable indicator of future returns

Fidelity Special Values is currently trading at a discount of 8.9% to its NAV, has ongoing charges of 0.69% and there is a 3% dividend yield for those who want an income. Please note this income is not guaranteed. Wright is also responsible for its sister open-ended fund, Fidelity Special Situations, where he follows the same type of strategy.

More on Fidelity Special Values

Source:

1,2 Numis Investment Companies Research, 7 November 2023.

Important information - 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. Shares in Fidelity Special Values PLC are listed on the London Stock Exchange and their price is affected by supply and demand. The trust can gain additional exposure to the market, known as gearing, potentially increasing volatility. 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.

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