Fidelity Special Values PLC (UK)

• Contrarian stock-picking approach

Portfolio managers Alex Wright and Jonathan Winton look for unloved companies that are entering a period of positive change that the market has not yet recognised. They follow a highly disciplined investment process that focuses first on evaluating downside risk and then on identifying positive change and potential upside. The focus is first and foremost on downside protection.

Since the trust launched in 1994, its portfolio managers have consistently applied this contrarian style investment approach. Alex’s philosophy is to base investment decisions on company fundamentals rather than top-down factors (market or macroeconomic drivers).

• Leveraging Fidelity’s global research platform

This contrarian approach is research intensive in order to identify and gain conviction in opportunities that are out of favour with other investors. The depth of Fidelity’s research ensures that there is a sufficient number of strong investment ideas to build a diversified portfolio at all points of the market cycle. Company research and the insight and expertise of our large team of analysts have been central to the long-term success of our approach.

• Three-stage investment cycle

Individual investments are considered in three distinct stages. On average, it takes around 18 months for a company to move through this cycle, but this can vary significantly depending on the speed of a company’s recovery.

Stage one: An initial position in a stock is taken. The holding will be gradually increased as and when the team’s conviction increases. Once the operational change takes effect, and an improvement in growth is evident, the company moves to stage two.

Stage two: Start of perception change by the wider market, leading to a re-rating of stocks. At this point, the managers will allow the position to increase in size.

Stage three: The company’s recovery process is well underway and the share price is close to the portfolio managers’ upside target; other investors are buying into the growth story. There is now less downside protection and less upside potential. At this point, the managers will reduce the position and recycle the proceeds into stage one companies.

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Important information

Overseas investments are subject to currency fluctuations. This trust invests more heavily than others in smaller companies, which can carry a higher risk because their share prices may be more volatile than those of larger companies and the securities are often less liquid. This trust uses financial derivative instruments for investment purposes, which may expose it to a higher degree of risk and can cause investments to experience larger than average price fluctuations. The shares in the investment trust are listed on the London Stock Exchange and their price is affected by supply and demand. The investment trust can gain additional exposure to the market, known as gearing, potentially increasing volatility.