FIDELITY SPECIAL VALUES PLC ANNOUNCES THE BEST FINANCIAL YEAR IN THE COMPANY’S HISTORY.
- The Company’s NAV and share price increased by +56.2% and +73.8% respectively
- The Company reports the best financial year in its history, both in terms of NAV and share price total returns
- The Company is close to the £1 billion market capitalisation for the first time in its history
- Stock selection primary driver of returns – largest contributors included Halfords Group, LSL Property Services and vehicle rental business Redde Northgate
London, 8 November 2021: Fidelity Special Values (The Company) today announces its annual results, reporting record returns for investors following a much-improved performance this financial year.
The Company recorded a share price total return of +73.8% and a NAV total return of +56.2% for the reporting year, both of which were meaningfully ahead of the FTSE All-Share Index (Benchmark Index) which returned +26.9%1. It has been the best financial year in the Company’s history, both in terms of the NAV and share price total returns. The Company is also now close to the £1 billion market capitalisation mark for the first time in its history.
Stock selection was the primary driver of returns over the year, reflecting the strong underlying earnings picture, particularly at some of the consumer facing businesses. Among the largest contributors, bicycle and motoring retailer Halfords Group reported a big jump in profits after sales of electric bikes and scooters almost doubled over the last year. Car distributor Inchcape and vehicle rental business Redde Northgate also performed strongly, benefiting from supply chain shortages affecting new car production.
Commenting on the performance, Alex Wright, portfolio manager for Fidelity Special Values PLC, said: “Our investors have been rewarded for their patience last year. This reflects our belief that it is often with the greatest disappointments that come the best investment opportunities, a principle that typically informs our search for new ideas among individual stocks.”
“We’ve seen UK equities continue to bounce back amid increasing optimism on the back of an acceleration in vaccination rollouts and the relaxation of restrictions. A sharp pick-up in corporate earnings also boosted investor sentiment, as did a flurry of takeover bids for UK companies, including ten portfolio holdings.”
“Mergers and acquisition (M&A) activity was a key feature over the period and boosted several of our key holdings, notably aerospace equipment supplier Meggitt which attracted an offer at a 70% premium to the prior closing price as well as private healthcare provider Spire Healthcare Group, where in this case we voted against the bid, as we believed that the offer undervalued the business.”
Seeking continued value within smaller companies
“While most investors were focusing on the large cap beneficiaries of an eventual market recovery following the COVID-19 dislocation, we have found many opportunities in the smaller companies space. While small-cap stocks have bounced back strongly since the beginning of the COVID-19 crisis, and indeed we have taken profits in some holdings, we still see significant value and upside potential available. This value opportunity is reflected in the number of recent takeover bids involving small and mid-cap stocks.”
Maintaining momentum for 2022
“Looking ahead, there are risks but also opportunities. Many companies are reporting input cost pressures due to supply chain issues and skill shortages, and these are areas that we are carefully monitoring. Conversely, the market has been quick to dismiss some of the corporate results and consumption trends seen recently as being temporary, but we believe some of these will be longer lasting and therefore are yet to be fully reflected in share prices. For instance, we believe the need for more space, hybrid working, lower rate mortgages and an expected pick up in the build-to-rent market will continue to support the housing market and companies involved in this sector. In fact, across many industries, the pandemic has accelerated restructuring plans, cost cutting and the introduction of new digital/online solutions, as well as significantly shrinking some of the supply in some industries (as companies have ceased trading). As a result, some businesses are emerging from the pandemic in a stronger competitive position.
“While the UK market has looked cheap over the past five years, the key differentiator in 2021 compared to prior years is that fundamentals on the ground look good. This is evidenced by the very strong profit recovery from COVID-19 that we have seen in 2021, with many companies already looking to produce profits in 2021 greater than in 2019.
“UK equities are well positioned not only to benefit from a recovery from the pandemic, but also from the lifting of the Brexit uncertainty which is starting to translate into companies finally committing to making new investments in the country, but also consumers, now with extra savings, more willing to buy big ticket items. The catch-up opportunity in terms of consumer spending after lockdown restrictions is significant and could be longer lasting than generally anticipated.
“We remain comfortable with how the portfolio looks from a valuation, return on capital and risk perspective, and continue to see meaningful upside potential for our holdings.”
Rolling 12-month share price returns net of fees, GBP (%)
|Past performance||31.08.16 - 31.08.17||31.08.17 - 31.08.18||31.08.18 - 31.08.19||31.08.19 - 31.08.20||31.08.20 - 31.08.21|
|Fidelity Special Values PLC NAV||19.09||8.69||-4.94||-18.47||56.16|
|Fidelity Special Values PLC Share Price||28.15||14.04||-6.90||-25.41||73.83|
|FTSE All Share Index||14.33||4.68||0.44||-12.65||26.95|
Source: Fidelity International and FTSE, as of 31 August 2021. The index is FTSE All Share Index (Net Return). Performance basis: Bid to bid with income reinvested in GBP terms, net of fees.
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