Fidelity Special Values: Making a case study for outperformance

With Fidelity Special Values plc (LON:FSV) having recently reached a decade of outperformance under fund manager Alex Wright’s stewardship, we look at what has made this happen. We outline the investment process, and then provide a couple of detailed case studies to illustrate how it works in practice. The approach is essentially a contrarian one, using Fidelity’s experienced team of analysts to look for unappreciated companies where there is a catalyst for change. This is underpinned by low valuations, which are used to provide downside protection, rather than being the source of outperformance that a conventional value approach might take.

  • AIB Group (Allied Irish Bank): The Irish economy had a boom that lasted almost two decades, but blew up the banking sector in the financial crisis. We discuss how the country and banks have dealt with the legacy issues, and are still underappreciated despite a concentrated market and improving profitability.
  • Serco: This was a “market darling” for over a decade, with strong growth. However, management controls were inadequate, and operational and accounting issues brought the share price crashing down. We talk about how the company is back on a sound footing, but still underrated.
  • Valuation: With quoted investments, there are no valuation issues. FSV aims to keep a single-digit discount in normal market conditions. It has mostly done this, aided by an active discount management policy. The company has both bought back and sold shares, adding a small amount to investor returns.
  • Risks: With a value-based investment philosophy, value being out of favour has constituted a headwind, although one that the manager’s stock-picking has largely overcome to date. The UK market has been a long-term underperformer relative to global markets, and there is a risk that it will remain out of favour.
  • Investment summary: While FSV currently trades in the middle of its discount range, this is better than that of most of its peers. Meanwhile, the stability of the team and the investment process suggest that this performance is built on solid ground. The dividend yield is higher than the average of its peers, suggesting that it should be attractive to investors looking for income alongside capital growth.
Click to view all articles for the EPIC:
Or click to view the full company profile:
Share on facebook
Share on twitter
Share on linkedin
Hardman & Co

More articles like this

Fidelity Special Values

UK’s FTSE 100 inches up as global mood improves

UK’s FTSE 100 index edged up on Thursday, tracking an improvement in global mood, while footwear maker Dr Martens logged its worst day in over four months after warning of lower earnings for the upcoming year. The blue-chip

Fidelity Special Values

IMF no longer expects UK recession this year

The United Kingdom will not, after all, be the worst-performing rich economy this year, the International Monetary Fund (IMF) said Tuesday, announcing a major revision to its previous gloomy forecast. The Washington-based organization said it now expects the UK economy

Fidelity Special Values

London stocks start strong as banks and miners rise

UK’s FTSE 100 opened higher on Monday, lifted by lenders and precious metal miners, but mid-cap oilfield services and engineering firm John Wood Group logged its worst day ever after Apollo Global walked away from a potential deal.

Fidelity Special Values

UK’s FTSE 100 edges higher

UK’s blue-chip FTSE 100 index was slightly up on Thursday, helped by gains in shares of export-oriented firms as the pound declined ahead of the Bank of England’s (BoE) monetary policy decision. The central bank is expected to

Fidelity Special Values

London stocks kick off May on bright note

London’s blue-chip FTSE 100 edged higher on Tuesday, boosted by a jump in shares of HSBC after the lender’s quarterly profit tripled, though overall gains were limited by weakness in energy stocks. The internationally-focused FTSE 100 rose 0.3%

Fidelity Special Values

UK economy shows signs of recovery despite inflation

UK private sector firms signalled a rise in business activity for the third consecutive month during April and the rate of expansion accelerated to its fastest for a year, according to S&P Global. A further robust rise in

Fidelity Special Values

Commodity-linked stocks boost UK’s FTSE 100 higher

London’s FTSE 100 rose on Tuesday as miners and oil stocks boosted the commodity-heavy bourse, while shares of Cineworld slid as the world’s second-largest cinema chain operator filed a plan of reorganisation. The blue-chip FTSE 100 (.FTSE) rose 0.4% to

Fidelity Special Values

FTSE 100 climbs

UK’s benchmark FTSE 100 rose on Wednesday after data showed the dominant service sector in March reported the strongest new business expansion in a year, although worries about a slowdown in the U.S. economy tempered the mood. The

Fidelity Special Values

Banks help UK stocks to surge

UK equities surged on Monday, helped by a gain in bank stocks on renewed hopes that the turmoil in the sector will be contained following the buyout of Silicon Valley Bank, while Standard Chartered (LON:STAN) jumped after agreeing to sell

Fidelity Special Values

FTSE forecast: UK stocks rally

The FTSE 100 index has come under pressure in the wake of the multiple midsized bank failures in the US, and, not to mention, the inevitable sale of the beleaguered Credit Suisse. The index outperformed other major indices

No more posts to show