Podger’s playbook

Jeremy Podger
Jeremy Podger
Portfolio Manager, Fidelity Global Special Situations Fund14 June 2018

We have many more than a football team’s worth of stocks in the Fidelity Global Special Situations Fund but below are some of the more interesting names, most of which have been playing very strongly recently. A few other holdings are currently on the touchline and perhaps being prepared for transfer so we will not mention them here.

In the fund we have three investment categories and the “team” selected below is drawn from all three. Unique Businesses have strong growth characteristics, so are more natural candidates for attack. Exceptional Value stocks often have solid asset support and bring up from the rear, perhaps more characteristic of defence. Corporate Change stocks have some defensive characteristics but should play well in a variety of conditions, so perhaps more like midfielders.

Goalkeeper

HCA: Shines in injury time. HCA is the leading acute care hospital operator in the US which has recently received a huge boost from US tax reform. HCA’s scale and negotiating power make it best in class in an otherwise difficult industry. The company has stronger admissions versus peers from its exposure to urban markets and faster growing regions.

Defenders

Sinopec: Red star. One of the two giant Chinese integrated oil and gas companies, Sinopec should enjoy structural growth in refining margins as China moves to new higher fuel standards and is also aiming for strong growth in non-fuel retail sales on the back of a unique set of assets that form the second largest network in the world. With higher earnings and a stronger balance sheet, the company has raised its dividend payout and now offers around an 8% dividend yield and trades at a steep valuation discount to international peers.

Apple: Forget the oranges at half time. Few would argue that the smartphone market has - for now at least - reached a stage of maturity. But Apple has a growing services business which is becoming an increasingly significant revenue contributor. All this adds up to an extraordinary stream of cash which is being returned to shareholders through dividends, an aggressive medium-term share buyback programme.  

Midfielders

Twenty-First Century Fox: Moving up the field. This time six months ago, Fox was a very cheaply valued global media player attempting to consolidate its holding in Sky, but has now been recognised as such through a bid from Disney and expressions of serious interest from Comcast. Likely to be transferred shortly.

Airbus: In for the long haul. A great transformation from the quasi state-run days of EADS, Airbus has been outstripping Boeing in passenger jet orders and has done an impressive job in introducing the new A350. As this programme matures and the volume deliveries of the A320 series roll off the production line, over the next few years profits and cash flow are set to take off.

Andeavor: Refined tactics. Andeavor was created in 2017 through the merger of two US refiners and now dominates the industry in the western region, with strength in gasoline retail and pipeline assets. This year it has been bid for by Marathon Petroleum which will give the combined group national reach and scale benefits.

Paypal: More than a one-click wonder. Paypal, a business that was spun out of eBay, has a leading technology platform enabling digital and mobile payments globally. It has a meaningful share of the global e-commerce market. The company’s network deals with Visa and MasterCard will help drive volume growth and remove potential competitive concerns. It has also expanded its services and solutions offering for merchants (partly through acquisitions).

Attackers

Booking Holdings: If you want to go to Russia, Booking.com can find you somewhere to stay. The company’s vast network of participating hotels and its unparalleled strength in optimising internet search queries has helped it continue to generate rapid growth and impressive cash flow.

Alphabet: Many shots on goal. Google’s holding company Alphabet is an exceptional innovator. While high margin, recurring search advertising revenues remain the dominant driver, it has unique strengths through the Android ecosystem and YouTube. The company is also actively incubating a host of faster-growing areas.

Deutsche Boerse: Thrives in difficult conditions. German derivatives exchange Deutsche Boerse is a beneficiary of rising market volatility and interest rates on top of underlying structural growth in derivatives. Its listed derivatives execution/clearing business Eurex and settlement/custody business Clearstream should deliver growth through the cycle.

GN Store: Highly sensitive but a leader in the field. Danish business GN is best known for its hearing aids where it has made great progress in using new technology (such as iPhone operability) to gain share. However, it has seen rapid growth in its audio segment where it provides headsets designed for “unified communications” systems used, for example, in call centres.

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Important Information

The value of investments and the income from them can go down as well as up, so you may not get back what you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. The Fidelity Global Special Situations Fund uses financial derivative instruments for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Changes in currency exchange rates may affect the value of an investment in overseas markets. Investments in small and emerging markets can also be more volatile than other more developed markets. Reference to specific securities should not be interpreted as a recommendation to buy or sell these securities, but is included for the purposes of illustration only. 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.