Fidelity European Values (FEV), run by Sam Morse, aims to offer long-term capital growth through a portfolio of European equities.
Portfolio: The trust is managed cautiously, with Sam seeking growth opportunities at a reasonable price. A key element of his strategy consists of picking companies based on their prospects for producing dividends and dividend growth, as he believes this indicates steady structural growth. The portfolio is relatively concentrated, typically with 40 to 50 holdings and the top ten holdings making up around 40% of the portfolio.
Manager: Sam has more than 25 years’ experience as an investor and has produced strong results at the helm of the trust since his appointment at the start of 2011.
Performance: The manager has managed to carry his strong record into 2019, and despite the cautious approach, has managed to outperform during the rebound.
Discount: The discount currently sits at 8.7%, having narrowed slightly since we last covered the trust in December.
Having been at the helm of the portfolio for over eight years, Sam has been able to prove himself as one of the better managers in the European sector, in our view. NAV total returns are ahead of the AIC Europe sector average over one, three and five years and FEV has clearly outperformed its benchmark over one, three, five and ten years (ending 15 October 2019). Alongside this, the manager continues to deliver strong dividend growth, although the yield is unlikely to appeal to income seekers (1.1%).
Due to the manager’s more cautious approach, his strategy is likely to become more favourable as we see continued volatility in 2019/20. We have seen an increasing number of people become increasingly nervous about holding highly valued growth stocks, and Sam’s approach of considering valuations is becoming increasingly favourable. We believe that this, along with some of the political uncertainty subsiding, could mean the discount will narrow in coming months.
|The fund is run by a manager with a strong track record for outperforming the benchmark and peer group||Europe continues to be out of favour at the moment, and the outlook is far from settled|
|Decent dividend growth||Discount volatility in the past has been extreme, and a bumpy ride for Europe could see that pattern repeated|
|Active discount control mechanism|