Stocks may have further to fall, and the economy is likely to be in recession for a long time, but looking at a breakdown of company fundamentals, “sectors are looking attractive when compared to those in the 1993 bear market, especially on a price-to-book basis”, says Sanjeev Shah, manager of the Fidelity Special Situations Fund. Directors are buying up their own companies’ shares and analysts are becoming more realistic and lowering valuations. As you’d expect from a value investor, Shah’s buying.
An economics graduate from Cambridge, Shah has been snapping up financials, especially non-banking ones such as Provident Financial. After taking some profits from his pharma holdings late last year, he now likes cyclical consumer stocks in the leisure, media and retail sectors, which are “attractive versus history and are under-owned”. BSkyB is a favourite. But although he describes himself as a contrarian stock-picker, the top ten holdings of his fund would suggest otherwise, with Vodafone, Shell and GlaxoSmithKline among the biggest holdings.
Given the current climate, investors will probably forgive recent moves into more defensive stocks. However, they might not remain forgiving if Shah fails to repeat the legendary performance of Anthony Bolton, who ran the Special Situations fund until January 2008. Since then, it’s down 25.7%, against a 27.3% drop for the FTSE All-Share. That doesn’t sound like a ringing endorsement for Shah, especially when he is predictably, if a little unfairly, compared to Bolton. It took his predecessor 27 years to turn 1,000 invested in his Special Situations fund into about £140,000. Shah, often referred to as ‘one to watch’, may yet need time to prosper.
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Threadneedle Emerging Market Bond Fund top ten holdings
| Name of holding | % of assets |
|---|---|
| Vodafone Group | 4.5 |
| Royal Dutch Shell A Ord | 4.1 |
| British Sky Broadcasting Group | 3.7 |
| GlaxoSmithKline | 3.7 |
| HSBC Holdings | 3.5 |
| Compass Group | 3.3 |
| Astrazeneca | 3.2 |
| Pearson | 3.1 |
| Premier Farnell | 2.6 |
| Provident Financial | 2.6 |