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FIDELITY SPECIAL VALUES: Boss sees Special gains in UK market

FIDELITY SPECIAL VALUES: Fund manager Alex Wright sees Special gains in UK market

Fund manager Alex Wright is confident he can extract further investment returns from the UK stock market over the coming months – despite the market wobble last week over fears of rising inflation.

He believes the UK market remains extremely attractive despite the strong gains of the past year, while company valuations, he says, are not overstretched.

‘I’m still very excited about the market,’ he says. ‘It still has a long way to go and with two big risks gone away – namely Brexit and coronavirus as a result of the vaccination programme – I’m very much in positive mode.’ 

Wright is the lead manager of both investment trust Fidelity Special Values and fund Fidelity Special Situations, investment vehicles made famous in the 1990s and 2000s by Anthony Bolton – at the time considered one of the country’s most brilliant fund managers. 

Like Bolton (now retired), Wright’s modus operandi is based around buying unloved stocks in the hope that their share prices will rebound at some stage in the future. The two funds currently hold near identical stocks, but the stock market listed trust has performed significantly better than the fund over the past year because it has provided Wright with the tools to borrow cheap money and use it to increase exposure to a stock market poised for recovery. 

The assets he has bought with these loans have soared in value. 

So, in the past six months, Special Values has recorded overall returns of nearly 33 per cent, compared with 26 per cent for Special Situations. The trust’s borrowings account for 13 per cent of its total assets although it was higher at 20 per cent last autumn. 

Special Values is invested across about 100 holdings with more than 80 per cent of its £1billion of assets exposed to the UK stock market. The trust is banking on a strong housing market and a big pick-up in consumer spending in the coming months. It has holdings in a number of housebuilders, both in the UK and also in Ireland – the likes of Redrow and Vistry (UK) and Glenveagh and Cairn (Ireland). 

‘Housing supply remains low in both the UK and Ireland,’ says Wright. ‘Yet demand is being driven by the low cost of mortgage finance. 

‘That in turn is pushing up prices as evidenced by the recent data from Halifax showing average annual house price increases for the UK in excess of 8 per cent. Provided these increases don’t get into the high teens, they shouldn’t pose a problem.’

The trust also has a number of housing-related holdings: including Kingfisher (owner of DIY specialist B&Q), builder’s merchant Grafton, consumer products specialist Norcros, and Forterra, the country’s biggest brick manufacturer. In addition, it has a stake in estate agent LSL Property Services (owner of Your Move). 

The other big ‘sector’ position is in financial stocks – the trust’s two biggest holdings are in insurers Legal & General and Aviva while it also has stakes in Just and Phoenix. ‘This is a trust set up to benefit from a recovery in the UK economy,’ says Wright. 

‘Provided the vaccines can be tweaked to deal with any virus mutations that might come our way, I am confident there will be strong growth as the economy opens up.’ 

The trust’s annual charges total 0.98 per cent and the stock market identification code is: BWXC7Y9. Income is paid twice a year and is equivalent to just below two per cent a year.  



Read more at DailyMail.co.uk