Asset Management

Now Is A Great Time To Buy Equities - Fidelity Special Situations Fund

Tom Burroughes Group Editor London 25 August 2011

Now Is A Great Time To Buy Equities - Fidelity Special Situations Fund

The recent fall in equity markets has created the best opportunity to snap up stocks since March 2009, argues the manager of the Fidelity Special Situations Fund, which invests in UK firms.

“The current level of fear amongst investors is throwing up some outstanding investment opportunities for long-term investors despite the uncertain economic environment,” argues Sanjeev Shah, manager of the fund. The portfolio holds a total of £2.87 billion (around $4.7 billion) of assets (source: Trustnet).

Shah said he took out some protection in the form of buying put options – giving the option to sell a security – when the UK FTSE 100 Index of blue-chip stocks was over the 6,000 index level. These have been sold when the index fell towards 5,000, he said in an investment note.

The manager will hope his judgement calls bear fruit. In the year to date (as of 30 June), the fund has delivered cumulative growth of just 0.5 per cent, and 13.8 per cent over one year (source: Fidelity Investment Funds).

“At today’s market level there are many individual shares which are attractively valued on a range of measures. Many stocks are trading at historically low multiples of earnings and offer attractive dividend yields in what is likely to remain a low-interest rate environment. Corporate balance sheets are in much better health than two years ago. Shares also look good value compared with other asset classes and allocation to equities in institutional portfolios remains at historically low levels,” he said.

“In this low-growth environment, I believe that companies which are able to demonstrate sustainable sales and earnings growth should be priced at a significant premium, which currently is not the case. These growth names, which can also be unloved and unfashionable, make up a significant part of the portfolio today,” Shah continued.

“Despite the corporate interest from News Corp in BSkyB having disappeared in the short term, the investment case remains robust. BSkyB has a unique market position in pay TV, with solid pricing power and the ability to increase penetration of triple-play services resulting in good revenue growth. I am also attracted to the mobile data theme, which is being fuelled by the growth of smartphones and tablets. I have exposure to this theme from material positions in stocks like Ericsson,” he said.

Shah also said he favoured online firms such as Moneysupermarket, IG Group and Ocado. He is also confident that emerging markets consumer spending will be a growing theme, which is why his fund holds a large position in names such as Burberry and L’Oreal.

He added that he has been looking to get exposure to a recovery in the US housing market, which he says looks to offer value after recent selloffs.

 

Register for WealthBriefing today

Gain access to regular and exclusive research on the global wealth management sector along with the opportunity to attend industry events such as exclusive invites to Breakfast Briefings and Summits in the major wealth management centres and industry leading awards programmes