Fidelity European Values (FEV) is managed by Sam Morse, who selects stocks on a bottom-up basis, focusing on quality companies with strong balance sheets that are able to grow dividends over the long term. He notes that investor concerns that affected the market in 2019 are abating: central banks are very supportive; a resolution to the US-China trade war is looking more likely; and within Europe, there is the prospect of fiscal stimulus to support economic growth. While there is potential for a rotation in market leadership towards cyclical stocks, which could put the fund’s relative performance under pressure, the manager is ‘sticking to his knitting’, and remaining disciplined, rather than shifting his portfolio exposures in an effort to try to ‘time the market’.
While improved investor sentiment drove a re-rating of the European market in 2019, central banks remain very accommodative and there is potential for fiscal stimulus to support economic growth. These factors may lead to further upward moves in equity prices in 2020, despite above-average total returns last year.
- Strong performance track record – the trust has outperformed the benchmark over the last one, three, five and 10 years.
- Experienced fund manager, with a disciplined investment approach, who is able to draw on the broad resources of Fidelity’s analyst team.
- Long-term record of dividend growth, supported by a focus on well-financed companies that can grow their own dividends.
FEV’s shares are currently trading at a 7.1% discount to cum-income NAV, which is narrower than the average discounts of 8.4%, 9.3%, 9.0% and 10.8% over the last one, three, five and 10 years, respectively. The trust pays dividends twice a year in November and May; the annual ordinary payment has increased in each financial year since 2010 and FEV currently offers a 3.3% yield. Gearing of up to 30% of NAV is permitted; net market gearing was 3.8% at end-November 2019.