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Fidelity European Trust - Not persuaded by great (rotation) expectations

Fidelity European Trust (FEV, formerly Fidelity European Values) aims to achieve long-term growth in both capital and income from a portfolio of European stocks. FEV is managed by Sam Morse and Marcel Stötzel and has an established track record of attractive returns and outperformance – it has made an average annual return of 11.3% in share price terms and 10.1% on an NAV basis over the past 10 years and outperformed the index over three, five and 10 years. The trust also did relatively well over most of 2020 and was substantially ahead of the benchmark for the nine months to end September 2020, but the performance, while still positive, lagged the benchmark in Q420 and Q121 as value stocks and cyclicals outperformed growth strategies. However, the trust’s managers are sceptical of the case for a full-blown rotation into value and they are not tempted to chase the market and adjust the portfolio in anticipation of a sustained value rally. Instead, they intend to maintain their current, more balanced, course, seeking out quality companies with strong balance sheets and positive dividend growth prospects at attractive valuations. They believe this approach has served FEV’s shareholders well and they expect it to continue to do so in the future, when markets are once again guided by fundamentals, rather than expectations of economic developments that are, in their view, far from assured.