How FIDELITY SPECIAL VALUES made 11.5% a year over a decade: Contrarian manager Alex Wright has delivered a 198% return for investors

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Investment manager Alex Wright just completed ten years at the helm of the investment trust loyalty special value, And despite some major challenges along the way, especially in the initial months of the lockdown when the trust’s share price fell sharply, it has done a decent job for shareholders.

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Over the last ten years, they have delivered an overall return of 198 per cent – 11.5 per cent per annum for investors. This compares favorably to the 89 percent return reported by the FTSE All-Shares Index.

Although Wright believes that the UK economy will soon fall into recession, he does not think it will cause the UK stock market to fall.


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In fact, he argues that when uncertainty rages, there are plenty of opportunities for fund managers and investors to pick up bargain stocks that can prove to be solid long-term investments.

And he is of the view that the UK stock market, where the trust is heavily invested, is historically undervalued compared to other markets.

“With inflation in the double digits, it is unlikely that investors will enjoy the same real returns that they had earned over the past decade,” he admits. ,

And the growth stocks that previously drove the markets — especially in the United States — won’t be the stars of the next decade.

But for funds like Special Values, where the emphasis is on identifying well-undervalued companies that have the ability to weather any downturn, we have an opportunity to continue to make money for shareholders.

He says it is too early to say what effect the Conservative government led by Liz Truss will have on the economy and the UK stock market. He believes that geopolitical issues and their impact on energy prices are big considerations.

Although they haven’t significantly reduced the hatch, the £815 million trust listed on the London Stock Exchange is in defensive mode.

It has very low borrowings and the portfolio is spread over 100+ holdings and across most sectors of the market. No individual holdings currently represent more than five percent of the trust’s assets, although Wright is happy to grow it to six percent before trimming it back in general.

“Diversification is the order today – exposure to large UK companies such as insurance companies Aviva and Legal & General as well as small to medium-sized companies,” he says.

‘We have a lot of investment ideas in trust,’ he says. ‘Given the uncertainty, we do not know how things will turn out.’

The biggest holdings are in outsourcer Circo and tobacco giant Imperial Brands. Wright says Circo is a ‘cyclical’ stock because of the steady stream of contracts investors can find from the government and its success in winning business overseas.

He says that the Imperiale brand is a super investment based on earnings only, providing an attractive yield of over 7 per cent. ‘Its earnings are not affected by the economy,’ he explains, ‘and it has got a lot of debt off its balance sheet.’

While primarily invested in the UK, the trust has international holdings – primarily in European healthcare stocks such as Sanofi and Roche. Holdings in US stocks – the likes of Hewlett Packard and Citigroup – were settled five years ago.

The stock market identification code of the Trust is BWXC7Y9 and its ticker is FSV. Annual fee total 0.69 percent. The trust’s shares are currently trading at a discount of nine per cent, which some investors may find attractive.

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