Spotlight
UK EQUITIES
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Important information This document is for investment professionals only and should not be relied upon by private investors. The value of investments can go down as well as up so the client may get back less than they invest. Past performance is not a reliable indicator of future returns. The Fidelity Special Situations Fund can invest in overseas markets and so the value of investments can be affected by changes in currency exchange rates. The Fidelity UK Opportunities Fund invests in a relatively small number of companies and, therefore, may carry more risk than funds that are more diversified. Both funds use financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The Fidelity UK Opportunities Fund launched on 1 September 2011 as the CF Eden UK Select Opportunities Fund. The EFA OPM UK Equity fund was merged into the fund in June 2013. The original fund was merged and rebranded the City Financial UK Opportunities Fund on 7 February 2014. Fidelity became ACD on 1 December 2014 and the fund was renamed Fidelity UK Opportunities Fund. 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. Investors should note that the views expressed may no longer be current and may have already been acted upon. Fidelity has been licensed by FTSE International Limited to use the name FTSE All Share index. Investments in Fidelity funds should be made on the basis of the current prospectus, which is available along with the Key Investor Information Document, current annual and semi-annual reports free of charge on request by calling 0800 368 1732. Issued by Financial Administration Services Limited and FIL Pensions Management, authorised and regulated by the Financial Conduct Authority. Fidelity, Fidelity International, the Fidelity International logo and F symbols are trademarks of FIL Limited. UKM0618/22091/SSO/0918
Welcome
Many investors shunned UK equities as an asset class after the UK voted to leave the European Union in June 2016, with concerns that domestically-focused stocks were likely to be the worst affected by dampening economic growth and a faltering pound. Two years on there is reason to believe things have changed. UK equity valuations are cheap on a global basis, and are trading at a discount to their pre-referendum price/equity ratios - in spite of the fact many companies have performed well in terms of earnings growth. As such, UK equities could offer a potentially attractive buying opportunity, particularly for those willing to invest against the market consensus. In spite of the UK's relatively 'cheap' status, investors will need to do more than simply buy cheap stocks in order to ensure they outperform. In the current environment, finding ‘genuine’ value doesn’t just involve identifying those companies where a company’s prospects differ from that of the market’s view, but means looking for companies that are being unfairly tarnished and analyse its ability to improve and create positive change in the near future. Taking such a contrarian approach at a time when the UK is marred by Brexit uncertainty and rising interest rates requires strong conviction, and for investors brave enough to challenge the current outlook a highly active approach to stock selection is required. But given the UK equity market’s history, betting against the herd could prove a positive move in 2018.
To me risk is about how much absolute downside protection there is and what could potentially change that
When we invest in a stock and the consensus is wrong, that is when we have the ability to make a lot of money
Patient investing
Stock recovery
Bottom-up focus
Portfolio manager Alex Wright explains how the contrarian-focused Fidelity Special Situations Fund has been able to outperform the broader market since he took over in 2014. He also discusses some of the challenges associated with investing against the tide of opinion, while revealing how it can provide a very favourable risk-return profile when executed successfully
In addition to this, his avoidance of large defensive stocks such as British American Tobacco, Unilever and drinks giant Diageo has also helped the fund as this area of the market has underperformed – British American Tobacco is down by over 30% over the last 18 months alone. Wright has been as much as 20% underweight defensives in recent months. Avoiding these stocks is not a strategic decision he has taken at a broad level as Wright believes it is possible to find value in all areas of the index at any given time. For example, recently he has bought the likes of Pearson, Paypoint and Bunzl. Notably these companies are relatively defensive in nature - with limited exposure to the economic cycle – yet operate in sectors that are typically regarded as cyclical. When selecting stocks on an individual basis in this way, Wright ensures no stock ends up accounting for more than 10% of the risk of the fund. Similarly, he is careful to ensure he is never over-or-underweight core factors such as currency or the oil price in order to avoid unnecessary risk. “I don’t look at stocks relative to a sector or benchmark; what matters to me is permanent loss of capital. Risk is important but I don’t see it as a variability or volatility, which is how a lot of investors can analyse it. I am definitely aware of how the fund looks from a ‘beta versus benchmark tracking error’ point of view, but to me risk is about how much absolute downside position there is and what set of circumstances could change that.” Having now managed money for over a decade – he started running client money in 2007 before launching the Fidelity UK Smaller Companies Fund in March 2008 – Wright has experienced a number of market lows including the global financial crash of 2007 and 2008 as well as the European banking crisis in 2011. As he navigates today’s uncertain political backdrop and the potential end of the bull market approaches, he insists maintaining a sense of perspective is key, particularly when investing with a contrarian style. “There has been a lot of volatility over the 10 years that I have been running money, including the financial crisis which even today, continues to affect people’s mindset. We may well have a bear market soon, but in normal bear markets stocks fall 20% or 25%. The 40% fall we saw 10 years ago was very unusual. “But I have learnt that it pays to be patient, particularly when it comes to investing in stocks which are unloved by other investors. And it is the psychology of being able to consistently learn from mistakes and the things you do right that allows you to continue to move forward. What is interesting in the market today is that [even as contrarian investors] we are not being paid to take unnecessary risk so for many investors value is proving to be a good diversifier,” Wright adds.
“While I am aware of the macro, and do take into account different economic circumstances, forecasting the future is extremely difficult. Our edge is the ability to always look on a stock-specific basis at a range of outcomes; analyse the upside/downside possibilities and invest accordingly so that when our contrarian view is correct, the fund is able to outperform.” Yet Wright reveals his portfolio ‘hit’ rate of going against the consensus is fairly low, at just under 50% with the management team getting things wrong more often than right. However, Wright believes investors must be willing to accept this. “As a contrarian investor, you have to be willing to get it wrong sometimes. Particularly because the market consensus is there for a reason; and on average it is correct. The issue with this is the opportunity to make money when investing in line with the consensus is greatly reduced. “So if we invest in a stock the market believes is doomed, and the consensus is correct, we don’t lose very much – as the market has already priced it accordingly. However, when we invest in a stock and the consensus is wrong, that is when we have the ability to make a lot of money.” He adds: “I spend 95% of my time only looking at individual stock stories and for me, I am most concerned when the market is rising and challenging my conviction. But when the market is going the other way, that is a great buying opportunity and it is generally when I am most excited. As long as I understand what is going on, I have confidence in the stocks I invest in.” He points to Ladbrokes Coral, a stock that he has owned for several years, as an example. The stock was cheap when Wright acquired it due to a number reasons including the potential regulation of online gambling by the government. Yet in spite of this, and following a number of mergers, including a corporate merger with GVC earlier this year, it has been a best performer in the fund’s portfolio over 12 months. Wright has also continued to believe in the cyclical recovery of banks via holdings in Lloyds Banking Group and Citigroup, which account for around 9% of the portfolio. Their out of favour status since the 2008 crash has resulted in them trading below their intrinsic value. However, Wright believes there is strength in both the UK and global recovery and this is already being seen in the turnaround of the share price of both stocks.
Alex Wright, portfolio manager of the Fidelity Special Situations Fund
‘Why it pays to be patient as a contrarian investor’
The challenges of being a contrarian investor are well known, and for many ignoring a hardwired and natural impulse to follow the herd is not one that comes easily. Yet the managers of the £3.3bn Fidelity Special Situations Fund have spent close to 40 years doing just that. Launched in 1979 by Anthony Bolton, the fund is one of the longest-running in the Fidelity stable. The strategy has been built on the management team going against the market majority and investing in unloved UK companies that are overlooked by other investors. Today the strategy is run by portfolio manager Alex Wright, who took over management in January 2014. Wright has honed the contrarian and value focus of the fund and has continued to outperform the IA UK All Companies benchmark by at least 3% per annum, much like his predecessors on the fund. For Wright, the concept of value investing is today at a crucial point. A decade after the financial crisis, current market valuations look vulnerable in the face of higher interest rates and other economic pressures – particularly among larger companies that should produce more dependable earning streams. “Value performance on a global basis has been poor on a 10-year period; this is the first ever 10-year period it hasn’t outperformed in. However, figures dating back to the 1950s reveal that value investing has, more often than not, outperformed over longer time periods, and if you believe in mean reversion, which I certainly do, then I would argue now is a particularly good time to be investing in value globally,” explains Wright. “For the UK, the case for a value-focused approach is supported by the fact that we don’t have the inherent biases to highly valued technology companies, like in the US which make up a huge portion of the index and in some cases grow faster than the market. In the UK, the largest companies are often not the best companies and we have seen them struggle to achieve growth over the past two years. Actually what has really been working is value.” Wright uses a bottom-up discipline to choose the 100 or so stocks that are currently in the portfolio. He specifically aims to invest in stocks trading below their intrinsic worth and where there are potential catalysts that could change the prevailing negative view of them.
Throughout this process our analyst team continued to meet company management and visit sites in order to assess whether it was actually building the number of houses it said it would and importantly gain comfort around the margins it was making on the houses built. The impact of the Brexit vote actually hastened a sell-off mid-2016 to a point where the stock was trading below its IPO price despite it being in a much stronger fundamental position. Since then, however, we have seen the stock aggressively re-rate over the last 18 months or so as sell-side coverage increased and the market became more comfortable in Cairn’s ability to deliver homes at scale. At the same time, Irish house prices have also accelerated at a double digit rate. While the recent share price performance has seen the company move from stage one as an overlooked opportunity to stage two of my investment process where its earnings and market perception has improved, I believe there is still more to come from Cairn before it moves into stage three, where its share price gets closer to my upside target. It is still in the early stages of delivering operationally - it built 420 houses in 2017 and is on track to deliver 1,200 by 2019. As it continues to scale up, we expect Cairn’s return on equity to increase while it should also continue to benefit from the broader recovery in Irish housing given its dominant position in the market.
Notably, at the time of listing Cairn was initially valued in line with its UK-listed peers, yet the market dynamics it faced were substantially more attractive. For example, in 2014 there were just 10,500 housing completions in Ireland versus demand of around 25,000 units. House builders tendency to buy land at the bottom of the cycle means they can generally expect margins to reach the high-teens (closer to mid-20s for Cairn given Irish housing market strength). Cairn had no serious competitors (as they had gone bust), and had the hallmarks of a typical stage one stock for the portfolio. Therefore it was a compelling opportunity and we moved to initiate a sizeable position at IPO. The stock didn’t move a great deal over the first 12 months of ownership. During this period, the company twice went back to the market to raise further equity via share placements in December 2015 and March 2016. The investment thesis hadn’t changed so we participated in both placements and increased our exposure to the stock. Throughout this process our analyst team continued to meet company management and visit sites in order to assess whether it was actually building the number of houses it said it would and importantly gain comfort around the margins it was making on the houses built. The impact of the Brexit vote actually hastened a sell-off mid-2016 to a point where the stock was trading below its IPO price despite it being in a much stronger fundamental position. Since then, however, we have seen the stock aggressively re-rate over the last 18 months or so as sell-side coverage increased and the market became more comfortable in Cairn’s ability to deliver homes at scale. At the same time, Irish house prices have also accelerated at a double digit rate.While the recent share price performance has seen the company move from stage one as an overlooked opportunity to stage two of my investment process where its earnings and market perception has improved, I believe there is still more to come from Cairn before it moves into stage three, where its share price gets closer to my upside target. It is still in the early stages of delivering operationally - it built 420 houses in 2017 and is on track to deliver 1,200 by 2019. As it continues to scale up, we expect Cairn’s return on equity to increase while it should also continue to benefit from the broader recovery in Irish housing given its dominant position in the market.
Investing against the tide is a psychologically difficult thing to do, and unfortunately out of favour companies don’t often turn into stockmarket darlings overnight. In terms of my investment process, the stocks I own tend to move through three distinct stages; from unloved and out of favour in stage one, through a period of positive change in stage two, to recovery in stage three. But how does this play out in practice? A good case study of this process is Cairn Homes, an Irish housebuilder that I’ve held in the Fidelity Special Situations Fund and Fidelity Special Values PLC since it listed on the London Stock Exchange in 2015. Three years ago the Irish property sector was firmly out of favour and off the radar of many investors. It had been decimated during the global financial crisis. The number of houses built had fallen from around 90,000 completions pre-crisis to nearer 10,000 by 2012. House prices also corrected sharply. However, after years of austerity, nascent signs were emerging that the Irish economy was starting to recover. Demand for housing was slowly recovering, but there was almost no one building new homes in Ireland. There was clearly an opportunity in the market. As the only Irish housebuilder of scale left post-crisis, Cairn was uniquely positioned to capitalise on this improving backdrop. No other company had both the expertise to build houses and - via its plans to list - the capital to acquire and develop sites. One of the advantages we have at Fidelity is we are generally made aware of upcoming initial public offerings (IPOs) at an early pre-marketing ‘pilot fishing’ stage. With Cairn, this was around six months before its listing which enabled our analysts to start doing some early due diligence work to build conviction in the scale of the opportunity and Cairn’s ability to profit from it. In this case, we couldn’t look at Cairn’s own annual reports as it wasn’t listed and was only founded in 2014. However, we could visit the company and its development sites to gain an insight into what land it had bought and most importantly, the management team’s commitment to executing its stated strategy. We did a lot of work looking at listed peers in the UK in terms of the returns they were generating, and how they had performed across previous market cycles. We also spent time analysing the Irish market - understanding not only where house prices were relative to history and indeed the UK, but also the health of domestic banks and whether they were in a position to start lending again. As a result of this analysis and due diligence, we were able to build conviction. It became clear over time that the scale of the opportunity was not being fully recognised by others. This was relatively rare for an IPO as new listings tend to attract a lot of fanfare but in this case, the broader market was likely scarred by memories of the crisis. 2015 was also a busy period for new listings and there was a lot of attention on seemingly more exciting and fashionable stocks and sectors.
Market dynamics
A typical contrarian investment in the Fidelity Special Situations Fund progresses through three distinct stages. Here, portfolio manager Alex Wright analyses the process in action with Cairn Homes, an Irish housebuilder that he has held since it listed in 2015
Cairn Homes: From unloved to recovery
Are equities entering a new phase of earnings support?
Discovering the (not-so) elusive UK consumer
Confidence among consumers looks relatively normal and in line with a relatively robust economy
Leigh Himsworth, portfolio manager of the Fidelity UK Opportunities Fund, assesses whether it is a mistake to read too much into the high street’s recent weakness
In addition, there are stocks that are unduly caught up in the fear, leading some investors to panic out of a sector and, again, it is my role to look for such opportunities, perhaps a well-run business such as SuperDry would fall into this category - as a stock that has suffered over the first half of 2018 despite no major negative news. If you were to look on a Bloomberg screen at the relative share price performance of Debenhams versus ASOS or William Hill versus GVC it is easy to see the contrasting fortunes of the winners and losers. Importantly, this level of divergence in returns creates great potential for stockpicking if you can identify those companies that are responding and positioning for change. Is the UK consumer dead? Not on your life!
Consumer confidence
Headlines regarding the health of the high street have been a dominant staple in newspapers in recent months, and investors would be forgiven for believing the consumer seems to have taken their bat home and is not spending. Yet I think this statement is hugely wide of the mark. The malaise on the high street being seen at the moment and poor results from restaurants should not be interpreted as signs of a weak consumer; rather it should be considered as structural over-supply in specific sectors. Let me give you some examples that may strike close to many of your hearts. How many of you, especially those with children, have found that home telecoms and entertainment bills have gone through the roof? Today, subscriptions to Sky, Netflix, and Amazon Prime are the norm, in addition to individual mobile phones and various app subscriptions (notably music in our household - with shocking taste in my wife and son’s case). Another mild irritation is the amount of delivery vans that seem to visit us - who, disturbingly, all seem to be on first name terms with the family, as are the Sainsbury’s delivery team! Meanwhile, how many of you in the last few years are now gaming online, eating out more, have moved house or bought a car (perhaps hybrid or electric?). Once these changes are put into context, it is possible to understand just how much consumer lifestyles have changed from 10 years ago without realisation. It also allows us to better understand that the UK consumer’s disposable income has not collapsed, it is simply going to different places than it may have done previously. If we look at the numbers, confidence among consumers looks normal and in line with a relatively robust economy. Wages are now finally running marginally ahead of core inflation. Consumer credit shows a similar picture – that of boring normality rather than one of panic and gloom that the media would have us all believe. As investors, it is imperative to see such change and to determine firstly whether it is a simply cyclical or a more seismic structural shock. The next step is to avoid losers. This is often easier than finding winners as it is more straightforward to spot empty shops or poor staff morale. It is easy to see, for example, the ongoing issues that companies such as Debenhams or Marks & Spencer’s are having. A significant chunk of their capital is simply in the wrong place. Having been a great virtue a few years ago to be the cornerstone of any town centre retail offer, the fact that each of these have several-storey store venues in many secondary sites is now a huge drag on their business. It is equally important to identify the drivers of change and to pick some ways to play this, perhaps the new retailers, such as Gear4Music or to think a little wider into areas such as online gaming or the IT or logistics that support the change. In the Fidelity UK Opportunities Fund, for example, I have held stocks such as GVC or GB Group for just these reasons.
Positioning for change
Whether value or growth takes the lead over the next year or two is likely to be determined by changes in the macroeconomic environment which are difficult to predict
In mid-2016, we argued that the gap between value and growth stocks in the UK had become unsustainably large, and that there was a strong case to position for a mean reversion in favour of value. However, stocks today seem more evenly priced, and arguably more connected to economic fundamentals. As such it does not seem appropriate to paint the market with broad brushstrokes. Value investors can draw confidence from the well-established fact their style outperforms the market over the very long-term, and we fully expect this relationship to persist in the future. However, whether value or growth takes the lead over the next year or two is likely to be determined by changes in the macroeconomic environment which are difficult or even impossible to predict. With input and financing costs rising, consumer behaviour evolving, central banks changing policy, and sentiment generally positive, it seems certain that today’s market will be one of large relative winners and losers. But at this point, it is too reductive to paint stocks simply as value or growth. We should look beyond these labels, towards rigorous and differentiated fundamental research and performance driven more by stock selection than by style bias.
Value versus growth
Technologically challenged
A political red herring
The UK technology sector constitutes less than 1% of the index - the lowest of any major global market (the US has 25%, for example). The biggest UK technology stocks are the likes of Sage and Micro Focus; although they may have their attractions, they are not exactly household names leading the digital disruption of the global economy. While we may not have much in the way of big tech brands in the UK, we have plenty of consumer brands owned by global groups such as Reckitt Benckiser, Diageo and British American Tobacco. Large-cap growth in the UK has been much more weighted towards these sorts of defensive consumer staples than disruptive tech. These stocks developed a strong correlation to the bond market, which helps to explain why they performed so well throughout 2014 and 2015, but also why they were so vulnerable to a de-rating as discount rates rose. A lack of exposure to the digital economy narrative also explains partly why the UK index has lagged other markets. Along with consumer staples, the UK market boasts bucketfuls of commodities. Among the value sectors, this group has been a stand-out performer over the past two years, with demand from China holding up better-than-expected, allowing the stocks to recover from the desperately unloved levels they were at in 2015.
A lot of focus recently has been on the outlook for value investing relative to growth. The subtext often seems to be that value might finally be ready for its moment in the sun, after years of being left in the shade by the growth style. Although value did indeed spectacularly underperform growth in 2014 and 2015, since 2016 this has entirely reversed in the UK, and in fact value is now slightly ahead over five years. However, looking at other global markets, it is easy to see why some might have the perception that value is yet to recover. For the past two years, value has been winning in the UK, but nowhere else. It is highly unusual for there to be a directional difference in style performance between two such diverse markets. So what’s going on? Taken in isolation, one would expect UK political worries to push investors towards defensive growth stocks rather than more cyclical value areas. And when we are talking about the UK market overall, we are generally talking about large, global companies, not likely to be impacted much by domestic UK politics. The types of large global companies we have listed in London vary considerably relative to those listed on other markets. It is these differences in sector weightings, rather than politics that help to explain why value has been outperforming in the UK but nowhere else.
Matthew Jennings, Investment Director at Fidelity, analyses the factors behind the recent outperformance of value over growth in the UK – despite value lagging globally
What is unusual about the UK stockmarket today?
Over the last few years there has been two fairly distinct market regimes which have impacted the types of shares that have been in and out of favour. During 2014 and 2015, falling bond yields caused stocks with defensive and predictable earnings to become extremely widely owned relative to cyclical stocks. As such, there was very little value among defensive stocks. However, since the first half of 2016, expectations for global growth and inflation have risen, and valuations in some cyclical stocks now reflect a fairly optimistic view of the future. As a result, portfolio positioning has evolved and adapted to the changing market conditions. More recently, I have been finding an increasing number of bottom-up opportunities in defensive businesses, and relatively fewer cyclicals. As part of our monitoring of macroeconomic risks impacting the fund, we regularly produce analysis that shows how portfolio positioning has evolved over time. These weightings are primarily an outcome, rather than something I target. While some previously popular stocks such as British American Tobacco or Reckitt Benckiser have underperformed significantly over the past year or so, and may look appealing on dividend yield and P/E metrics, significant debt piles at the companies mean they are not yet attractive to me on a more revealing EV/Sales basis. In addition, these are businesses which have been optimised over many years, meaning positive change to profit margins is more likely to be behind us rather than ahead of us. Although I am yet to find much value in the most obvious defensive sectors, such as large-cap staples, there are a number of ‘hidden defensives’ - companies in sectors which are generally regarded as cyclical, but where the companies themselves have limited exposure to the economic cycle. In some cases, in fact, a weakening economy would work in their favour. When people think of the industrials sector, they tend to think of engineering and manufacturing businesses heavilylinked to economic growth cycles and capital spending. In reality, the industrials sector covers a hugely diverse range of businesses, including some which have much more defensive business models than the general view of ‘industrials’ would suggest, as seen in the examples listed here.
Alex Wright, portfolio manager of the Fidelity Special Situations Fund and Fidelity Special Values PLC, explains how he has had to adapt to changing market conditions in order to stay ahead of the market. He also discusses why he has recently been drawn to more defensive areas
Payments, petrol stations and coffee cups:
The hunt for hidden defensives
Engineering fundamentals
BUNZL
DCC
Paypoint
Paypoint is not only defensive but also actively counter-cyclical. The company operates terminals for pay-as-you-go utility customers. Utilities tend to put customers onto these tariffs if they miss payments, which is much more common during times of economic stress. The stock has a high dividend yield which tells us that the market views this company as in rapid structural decline. This appears too negative based on the work we have done. DCC is a company I have owned before and sold at a large profit in 2015. Since then, the market has become concerned about the impact of the growth of electric vehicles on DCC’s European petrol station business, and the stock has de-rated to a more attractive level. Although I accept that structural demand for petrol will decline, this will be at a manageable rate which does not seriously threaten the profitability of the business. Bunzl delivers disposable items such as coffee cups and paper towels to thousands of customers globally. Until recently, the stock had attracted a premium valuation as it successfully executed its acquisitive consolidation strategy, and was priced out of reach for a value investor. However, the stock has de-rated over the past 12 months, as the market has become concerned about increasing competitive pressure from Amazon, which has weakened sentiment and in my opinion, created an attractive buying opportunity. While it is true that if you or I wanted to buy a stack of paper cups, we would probably buy them from Amazon, most of Bunzl’s customers are commercial, and many of them, such as Walmart and Costa Coffee, are huge businesses. As such they need a customised, regular and reliable delivery service that fits in with their own operating patterns. Waiting around for an Amazon courier to deliver coffee cups is just not an option for the likes of Costa Coffee. After peaking on a P/E of 24x in mid-2016, the stock has now de-rated by 25% and is close to a five year low valuation. There are also engineering businesses which have very low correlation to the economic cycle - I have added to Ultra Electronics, Meggitt and Chemring. These businesses operate on different cycles to most engineers, with links to defence spending in the case of Ultra and Chemring, and the aerospace and defence aftermarket in the case of Meggitt. Meggitt has been increasing its market share in supplying critical components such as brakes for landing gear, which have long-term predictable revenue streams attached to them. The stock is one of the cheapest engineering stocks in the market despite significantly improving fundamentals.
37.4%
50.4%
IA UK All Companies
81% PEERS BEATEN
FTSE All Share
Fidelity Special Situations Fund
35.9%
94% PEERS BEATEN
33.7%
58%
Fidelity UK Opportunities Fund
Fidelity Funds in focus
Leigh Himsworth builds a high conviction portfolio of 40-60 quality growth stocks with a typical bias towards small and mid-cap stocks.
• Leigh looks for themes that could drive investor behaviour over a range of time horizons. He follows a disciplined approach to cash flow analysis and valuation; aiming to add value over the long term.
• Due to his benchmark agnostic approach, the portfolio bears little resemblance to the comparative market index.
• Leigh seeks out companies with low correlations and the scope for above-average earnings growth. He then combines them so every position can make a meaningful contribution to potential returns.
Past performance is not a reliable indicator of future returns. Source: Morningstar, 31 May 2018. Basis: bid-bid, net income reinvested in GBP. Index: FTSE All Share. Peer group: IA UK All Companies. Holdings can vary from those in the index quoted. For this reason, the comparison index is used for reference only. Fund ratings as at 30.04.18. Copyright - © 2018 Morningstar, Inc. All Rights Reserved. The Fidelity UK Opportunities Fund launched on 1 September 2011 as the CF Eden UK Select Opportunities Fund. The EFA OPM UK Equity fund was merged into the fund in June 2013. The original fund was merged and rebranded the City Financial UK Opportunities Fund on 7 February 2014. Fidelity became ACD on 1 December 2014 and the fund was renamed Fidelity UK Opportunities Fund.
FIDELITY UK OPPORTUNITIES FUND
• The situations Alex looks for include businesses with new products or expanding into new areas, a change in the competitor landscape, structural change in market demand, or M&A.
• He looks for stocks that offer downside protection. The harder the protection is - tangible assets, cash and low valuations – the higher the initial investments will be.
• He seeks out unloved UK companies entering a period of positive change not yet recognised by the wider market.
Alex Wright is a contrarian investor who invests against the weight of opinion in the market to find opportunities overlooked by other investors. He has been managing the Fund since January 2014.
FIDELITY SPECIAL SITUATIONS FUND
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