Fidelity’s UK investment trust: cheap companies with good upside abound

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Fidelity Special Values PLC (LON:FSV) has published its monthly factsheet for June 2024.

Portfolio Manager Commentary

UK equities failed to sustain their positive momentum in June. The spotlight remained on rate cuts, with the European Central Bank delivering its first cut since the pandemic. In the UK, the Bank of England (BoE) held interest rates steady at 5.25% even though inflation reached its 2% target in May for the first time in nearly three years, down from 2.3% in April, largely due to a slowdown in food prices. This led investors to temper their expectations for BoE rate cuts this year, particularly for August. However, the BoE minutes revealed a dovish tilt, with two members advocating for a reduction to 5.0%, signalling a growing inclination towards policy easing.  

While economic and geopolitical uncertainty is likely to continue, the UK’s cheap valuations compared to historical averages and other markets, and the large divergence in performance between different parts of the market, mean that we are finding attractive opportunities on a three-to-five-year view. The unloved status of UK equities 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. Our focus on picking good-value companies means the Trust trades on a far lower average price/earnings ratio than many peers as well as the FTSE All Share Index. 

On a rolling 12-month basis, the Trust recorded NAV and share price returns of 18.1% and 20.1% respectively, compared to 13.0% 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.

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