Fidelity Special Values PLC (LON:FSV) monthly factsheet for August 2023.
Portfolio Manager Commentary
UK equities declined in August, reflecting downward market trends in other regions as further weakness in economic data, particularly in Europe and China, led to concerns over the near-term outlook. Investors factored in expectations of further interest rate increases by the Bank of England (BoE) this year, as core inflation (which excludes prices of energy and food) remained stubbornly elevated at 6.9% in July, well above the BoE’s 2.0% target. During its August meeting, the BoE raised its policy interest rate to 5.25%, marking the 14th consecutive rate hike, pushing borrowing costs to levels last seen in 2008.
The relative attractiveness of UK valuations versus other markets and the large divergence in performance between different parts of the market continue to create good opportunities for attractive returns from UK stocks on a three-to-five-year view. The smaller end of the market cap spectrum is particularly rich in investment opportunities given the lack of research coverage. For us, this has always been a big structural overweight, and is an area where we are finding opportunities at the moment. Smaller companies have incurred severe deratings over the past year as they are thought to be more cyclical and thus more susceptible to an economic slowdown or recession. However, some of the share price drops, in our opinion, have been indiscriminate.
On a rolling 12-month basis, the Trust recorded NAV and share price returns of 5.9% and 5.6% respectively, compared to 5.2% 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.
