Share hunter who is happiest on attack in volatile markets
V VOLATILE stock markets such as those we are seeing now tend to m make investors q queasy. Not so Ale Alex Wright, manager of inve investment trust Fidelityid li S Specialil Values.l Wright, who has been at the helm of the 21-year-old trust for three years, says: ‘I’m happiest when markets are volatile and uncertain.’
The downs give him the chance to buy into stocks for the first time at a bargain price or increase exposure to those that he favours but are unloved by others. He also has the ability to ‘short’ stocks, so can also profit when markets fall.
A tumble in individual shares for reasons other than general market dizziness also catches his eye.
The trust holds more than 100 stocks in all sizes of company, but lately he has seen more value at the smaller end. He is seasoned in hunting down cheap shares in this category – he also co-manages the £310million Fidelity Smaller Companies fund and runs the giant Fidelity Special Situations fund (£2.7billion).
At Special Values he has doubled exposure to smaller companies to 60 per cent of the portfolio during his tenure.
Whatever a company’s size, he ensures the share price offers good value and that there is an element of protection, such as valuable assets backing the firm, or he looks for the likelihood of its fortunes improving significantly.
For example, he recently topped up his holding in British defence company Ultra Electronics after its contract with Oman airport fell through. Wright says: ‘The loss of that contract is not significant, but it affected the share price so I upped our holding.’
Though focused on UK firms, the trust can invest 20 per cent elsewhere. A recent buy is US games maker Electronic Arts. Wright says: ‘It had a poor reputation a few years ago and wasn’t good at reinvesting in the products. But new management has been turning it around with a focus on profitability, including buying back stock. Games are now updated regularly.’
Tim Cockerill, investment director at wealth manager Rowan Dartington, says: ‘The trust is well diversified and the mix of gearing and short positions means the net result has been impressive.’
But he warns that, as with all investment trusts, the discount or premium the shares trade at against the underlying assets changes. He says: ‘About half of the past year’s performance is from the discount closing.’