Portfolio Manager Commentary
UK equities advanced in March, buoyed by expectations of interest rate cuts by major central banks this year, encouraging economic indicators and merger and acquisition activity. During its March meeting, the Bank of England (BoE) decided to keep interest rates unchanged at 5.25%, the highest level since 2008, but there was a shift in stance from two of its staunchest hawks. Governor Andrew Bailey also hinted that inflation was heading towards the central bank’s target and that the UK economy was progressing to the point where the central bank may start cutting interest rates.
While economic and geopolitical uncertainty is likely to continue, UK valuations compared to historical averages and other markets – and the large divergence in performance between different parts of the market – means there are attractive opportunities in UK stocks on a three-to-five-year view. Their unloved status means that we not only continue to find overlooked companies with good upside potential across industries and the market cap spectrum, but we also do not have to compromise on quality. In aggregate terms, portfolio holdings trade on estimated price/earnings (P/E) ratios for 2024 and 2025 over 20% cheaper than the FTSE All Share Index, but have lower debt and stronger profit growth outlooks.
On a rolling 12-month basis, the Trust recorded NAV and share price returns of 11.2% and 9.5% respectively, compared to 8.4% for the index.
Fidelity Special Values PLC (LON:FSV) aims to seek out underappreciated companies primarily listed in the UK and is an actively managed contrarian Investment Trust that thrives on volatility and uncertainty.
