Fidelity Special Values says its net asset value underperformed the benchmark over the six month reporting period to 29 February 2016, returning -2.7% against -1.2% for the FTSE All-Share Index. The return to shareholders was -3.9%.
Alex Wright, the manager, says overall performance was impacted by negative investment surrounding some key holdings in the banking sector, such as Citigroup and Bank of Ireland. Banking is one area that lagged in 2015 and early 2016, but where the manager continues to find opportunities. For example, he thinks Lloyds Banking Group’s stock valuation remains very attractive and in February this year it announced a significantly increased dividend, sending a strong signal to the market on the financial strength of the company. The market has been unwilling to give the company credit for these positive changes, preferring to dwell on past misdemeanours rather than its future prospects. He increased exposure to Lloyds as well as other banking stocks during a particularly extreme bout of investor risk aversion. He has also increased holdings in companies with exposure to construction activity, such as Wolseley and CRH.
Several key holdings made a significant contribution with merger & acquisition activity remaining a key driver of portfolio returns. For example, the holding in business outsourcer Xchanging rose after the company agreed to
an offer from technology consulting company Computer Sciences Corporation following a bidding war. There were other holdings where the prospects of a turnaround and growth momentum helped their shares upwards, such as bookmaker Ladbrokes and Carnival, the world’s biggest cruise company.
FSV : Banking exposure holds back Fidelity Special Values