Top UK investment opportunities are hiding in plain sight

UK equities have strengthened in recent years, but the gains have not been evenly distributed. Larger companies have led much of the market’s progress, while medium and smaller companies have faced a tougher environment. That gap has started to close, creating a broader market in which company-specific opportunities are becoming more important.

For Fidelity Special Values, the strategy has a structural bias towards medium and smaller companies and focuses on businesses where market expectations appear too pessimistic. The approach is built around identifying companies facing temporary operational, cyclical or sentiment-driven problems where the downside can be understood and there is a credible route to recovery. Several of the current holdings reflect that approach.

Hays, PageGroup and SThree have operated through one of the weakest hiring markets in decades. Low recruitment activity, concerns about artificial intelligence and geopolitical uncertainty have weighed on valuations. Fidelity increased exposure to the sector over the past year after research and site visits suggested that much of the weakness was cyclical rather than structural. These businesses also have flexible cost bases and net-cash balance sheets, giving them room to reduce costs as activity slows while preserving financial strength.

Recent trading updates have shown signs of stabilisation in recruitment markets including the UK, Asia-Pacific and the US. Gross profit has also come in ahead of market expectations in some cases. That does not remove the risk of a prolonged downturn, but it strengthens the argument that depressed valuations could offer meaningful recovery potential if hiring activity improves.

Banks represent another area where Fidelity continues to see value. Exposure to the sector is now close to its highest level during the current lead portfolio manager’s tenure. The position began to increase towards the end of 2021 as rising interest rates and improving fundamentals created a better earnings environment. Since then, stronger earnings, higher returns on capital and substantial shareholder distributions have supported the sector.

Despite that progress, Fidelity believes valuations remain attractive. NatWest and Lloyds have been added to this year and were trading at around seven to nine times forward earnings at the time of the source data.

Glencore provides a different type of opportunity. Fidelity has generally remained underweight resources, but initiated a position in Glencore in March 2025 after a period of share-price weakness and earnings downgrades. The attraction was partly based on Glencore’s diversified commodity exposure, including copper. Fidelity’s research pointed to structural supply constraints and a supportive long-term outlook for the metal, while Glencore has a pipeline of projects that could increase its exposure to future demand.

The position has also been supported by other parts of the business. Coal exposure can offset some of the impact of higher energy costs, while Glencore’s global commodity trading operation can benefit from periods of greater market volatility. Fidelity added to the holding during 2026 as the investment case developed.

Bunzl is another example of a company where a specific operational problem created an entry point. The distribution group had been one of the weaker FTSE 100 performers after problems emerged in its North American foodservice division. Changes to decision-making and a shift towards higher-margin own-brand products damaged customer relationships and contributed to market share losses.

Fidelity’s research focused on whether the problems were temporary and fixable. Management reversed some of the changes and replaced divisional leadership, creating clear potential catalysts for improvement. More recent trading has shown better organic growth and the shares have started to re-rate.

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.