9th May 2014 12:20
LONDON (Alliance News) - Fidelity Special Values PLC Friday said its net asset value continued to rise over the first six months of the year, boosted by returns from stock picking.
In a statement, Fidelity Special Values said its net asset value per share rose by 14.6% during the six months ended February 28. In the same period, its share price increased by 16.6%. Both figures represent an outperformance against the benchmark's 8.8% rise. All of the figures were calculated on a total return basis, which included reinvested income.
Net asset value per share increased to 995.60 pence, from 883.93 pence over the six months.
Fidelity Special Values Chairman Lynn Ruddick said the company "reaped the rewards" of the "contrarian" positions it took in a difficult market environment when investors had become very negative on the prospects for a recovery in the UK economy.
"Positions in retailers, homebuilders and secondary property stocks have all helped the company to keep ahead of the benchmark index during the reporting period. Many of these stocks have risen substantially and the company has reduced its positions in the portfolio, as their share prices reflect a good deal of optimism regarding future performance," Ruddick said in a statement.
"After a strong performance in 2013, the UK equity market seems to have taken a pause for breath as it waits for corporate earnings to justify the somewhat extended valuations in some companies. In other areas, valuations do not reflect such positive expectations, and it is these areas that the portfolio manager, Alex Wright, is finding most attractive," Ruddick said.
In his report, Wright said "another bumper year" in 2014 is "unlikely" following very strong performances in the equity market over the last couple of years.
"I am holding a number of positions in these very large stocks, including Shell, HSBC and Sanofi, where I see significant potential for latent shareholder value to be unlocked. In the meantime, I can count on a healthy dividend yield to support the share price," Wright said in a report.
HSBC Holdings PLC represented 2.8% of Fidelity Special Values' exposure at the end of the first-half, while Royal Dutch Shell PLC represented 4.5%. The exposure to Sanofi was listed at 4.2%.
"Elsewhere in the market, I continue to see attractive returns available in a number of defensive mid caps which can reinvest in their businesses in a relatively low risk way whilst simultaneously paying a generous dividend to shareholders," Wright said.
Wright said companies such as fuel distributor DCC PLC, UDG Healthcare PLC and recently-listed convenience store operator McColl's Retail Group PLC fall into that category. Fidelity Special Values has a 4.3% exposure to DCC and a 4.5% exposure to UDG, but no figure was available for the McColl's exposure as it wasn't listed in the company's twenty largest investments.
"Otherwise, a number of riskier stocks with high exposure to the UK consumer recovery still look interesting, although many of the better quality companies in this area now look fully valued," Wright said.
Fidelity Special Values' investment objective is to achieve long term capital growth from an actively managed portfolio of special situation investments, consisting primarily of securities listed or traded on the London Stock Exchange, though up to 20% can be invested in overseas stock markets. Portfolio manager Alex Wright searches for undervalued companies across the UK.
The trust is managed by Fidelity, one of the UK's largest investment fund managers.
Fidelity Special Values shares were Friday quoted at 939.00 pence, down 0.2%.
By Samuel Agini; [email protected]; @samuelagini
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