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magazineFidelity European Values is just the ticket for current market conditions
Investors wanting exposure to decent companies at a relatively cheap price and via a liquid fund whose portfolio is a bit different to what you might expect should snap up Fidelity European Values (FEV).
Its objective is to achieve long-term growth in both capital and income by investing in European-listed companies. Fund manager Sam Morse has considerable expertise in picking stocks and has helped the fund’s net asset value (NAV) to beat the FTSE World Europe ex-UK total return benchmark consistently over the last five years.
Fidelity European Values is the largest fund in its peer group with nearly £1bn of assets but it runs a relatively concentrated portfolio of just 50 to 60 stocks.
While none of the big blue-chip names such as L’Oreal, Nestle, Roche or Total are companies undergoing rapid expansion, they meet the quality and growth criteria needed for the fund to mitigate downside risk in the event of market sell-offs.
The fact European Values invests in large-cap, liquid blue-chip stocks doesn’t mean it is slow-moving or an ‘index hugger’. Quite the opposite, Morse not only manages the fund actively but is able to use derivatives to nimbly hedge the market risk or to improve returns by shorting stocks, namely profiting if certain companies fall in value.
As the table shows, the fund can have very different individual stock weightings compared with the index.
A disciplined focus on owning high-quality stocks which are trading below intrinsic value and which have the potential to pay out a steadily rising stream of dividends is the key to generating above-average returns.
That and a long-term view which enables the fund to hold onto stocks for three to five years, compounding returns for investors while keeping trading costs low in the process.
At the time of writing the NAV was 242p against a share price of 214.5p meaning the discount to NAV had widened to 11.4% against a one year average of 9.8% and a three year average of 9.2%.
It means investors can buy the investment trust even cheaper than normal and also obtain exposure to a portfolio trading well below the value of its underlying holdings.
Important information:
These articles are provided by Shares magazine which is published by AJ Bell Media, a part of AJ Bell. Shares is not written by AJ Bell.
Shares is provided for your general information and use and is not a personal recommendation to invest. It is not intended to be relied upon by you in making or not making any investment decisions. The investments referred to in these articles will not be suitable for all investors. If in doubt please seek appropriate independent financial advice.
Investors acting on the information in these articles do so at their own risk and AJ Bell Media and its staff do not accept liability for losses suffered by investors as a result of their investment decisions.
