Fidelity Special Values (FSV) employs a value-based, contrarian investment style aiming to achieve long-term capital growth primarily through investment in UK companies, which the managers believe are undervalued or where potential has not been recognised by the market. FSV has endured a challenging period of underperformance. However, lead manager Alex Wright and co-manager Jonathan Winton believe the Q120 market sell-off created many investment opportunities, which they have sought to exploit. In their view, UK value stocks, and FSV in particular, now offer great value, which is further amplified by the trust’s current discount making for a good valuation starting point for investment. The managers see significant scope for the trust to outperform not only growth strategies and UK equities in general, but also other asset classes.
Value-based investment strategies have been out of favour with investors for some time, especially since the onset of the coronavirus crisis, when the market has focused on growth stocks, irrespective of valuations. In addition, UK equities are under-owned and trade at a significant discount to other equity markets. While this means that recent months have been painful for UK value investors, it has created a very attractive opportunity set, with significant upside potential.
Recently improved performance and outperformance of the UK market over the long term. A value-based, contrarian investment approach offering style diversification and the opportunity for investors to benefit when investor sentiment towards value stocks improves and/or individual holdings re-rate on improved fundamentals or perceptions.
FSV is currently trading at a discount of 9.2% to NAV, which compares with an average discount of 3.1% over one year, 1.3% over three years, and 2.9% and 5.9% over five and 10 years respectively. Based on the current share price, the trust offers a yield of 3.1%.