Where to find absolute value?
The UK market had a strong run of performance during 2017 and Fidelity Special Values’ (FSV’s) manager, Alex Wright, is increasingly asked whether he can still find absolute value in the market. His answer is a cautious ‘yes’. Alex acknowledges that valuations have increased but says this is countered by focusing on recovery stories, so that FSV’s approach does not rely on rising markets to generate returns. Furthermore, he highlights that while value investors need to be selective in the current environment, there are many stocks that are deeply out of favour and this generates opportunities. By way of example, FSV’s portfolio has 14 stocks trading below their book value. Alex sees strong potential from the portfolio and believes that his focus on having a ‘margin of safety’ gives significant protection in the event of a market sell-off.
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