Fidelity Special Values (FSV) announced its final results for the year with a NAV total return of 5.9% and a 5.6% share price total return against a Benchmark return of 5.2%. The company’s overweight to banks was the largest contributor to performance with the advisor noting that while the performance may look unremarkable at face value, it is notable given the significant differences between the company’s portfolio and the benchmark. More than 80% of the benchmark is accounted for by the largest stocks that make up the FTSE 100 Index (total return of 6.3% for the year), whereas FSV only has around a quarter of its holdings which are in the FTSE 100 Index. Overall, the weighting in small-cap and mid-cap companies hurt relative returns in the year under review, while stock selection in banks and financials, where the portfolio is overweight compared to the benchmark, contributed most to the outperformance.
Commenting on the outlook, chairman Dean Buckley added:
“The UK equity market has remained distinctly out of favour in a global context, particularly when compared with the US. The macro headwinds are undeniable: inflation has been stubbornly higher than in other developed economies, interest rates have risen further and faster, and there is the added uncertainty of a general election at some point in the next 15 months. However, there are also reasons for optimism: both core and headline inflation have begun to trend downwards, there is an increasing expectation that the Bank of England base rate is at or close to a cyclical peak and upward revisions to UK GDP numbers suggest a greater likelihood of avoiding recession. Added to this, the UK stock market remains at low valuation levels compared to other developed markets, reducing downside risk and providing the potential for significant upside when sentiment becomes more positive.
“Against this backdrop, we are fortunate to have a portfolio manager with an active and contrarian approach to stock picking that allows him to seek out pockets of opportunity that may be under-appreciated by investors both at home and internationally.
“There are many UK-listed stocks that may be affected by the economic cycle in the short-term but which have compelling company-specific stories that can be important drivers of their share price over time. By favouring attractively valued businesses with lower levels of debt and the resilience to navigate the climate of uncertainty, we are confident that Alex’s selections have the potential to deliver solid longer-term returns, as has been demonstrated in your company’s strong performance compared to the Benchmark over many years.
On a final note, it was very pleasing to see at the Company’s AGM on 14 December 2022 that the Company’s three-yearly continuation resolution was passed with 99.89% of votes in favour. We thank our shareholders for this overwhelming vote of confidence in Alex’s long-term approach and look forward to continuing to justify your support of Fidelity Special Values PLC in the years ahead.
FSV : Fidelity Special Values outperforms despite small-cap bias.