Fund Profile

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Disclosure – Non-substantive Research

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. With this commentary, Kepler Partners LLP does not intend to influence your investment firm's behaviour. 

Overview
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Overview

Fidelity European Values aims for long-term capital growth via a portfolio of European equities. It is managed with a conservative stockpicking approach, aiming to identify companies with strong balance sheets, proven business models and disciplined use of capital which the manager hopes can grow their dividend regardless of the economic environment.

The portfolio will typically be comprised of between 40-50 holdings, and at the time of writing the top ten holdings make up c.40% of total assets, making its concentration quite punchy, although by no means the most concentrated in the sector. The portfolio is dominated by large caps, defined by businesses with a market cap over €10bn make up 76.8% of the holdings.

Geographical restrictions are not imposed, and the portfolio is heavily concentrated in France (26.7%), Switzerland (15.3%) and Germany (15.3%). The rest of the portfolio is made up of smaller weightings around the 5% mark. The largest sectoral exposures come from financials (17.6%), health care (17.2%) and consumer goods (16.8%).

The fund manager, Sam Morse, has more than 25 years’ experience as an investor and has produced solid results at the helm of the trust since his appointment at the start of 2011. During this period, he has delivered an NAV total return of 107.4% against a return of 68.6% from the benchmark FTSE World Europe ex UK index. The trust has failed to produce positive returns since the start of the year (-1.5%), though this is largely due to the October correction.

Sam is reasonably positive on the outlook over the near future and foresees a pick up toward the back end of 2018. However, he thinks the outlook is more clouded over the medium term – with a recession possible in 2019/20. The discount currently sits at 9.8%, having widened slightly since we looked at the trust in January last year. Over the past five years we have seen the trust’s discount vary greatly, ranging from -2.8% to close to -18%.

Kepler View

The trust is well run by the fund manager, Sam Morse, who has produced strong results for the past eight years. His outlook is reasonably positive for the near future, although he does see a recession on the far horizon. We agree that there are plenty of opportunities to be found in Europe, largely due to the political noise surrounding many of the countries and the impact that this has on valuations of high quality international companies who merely happen to be domiciled there. Although the current discount of 9.8% isn’t much wider than the five-year average, we it could narrow once we begin to see some of the political uncertainty subside around Brexit.

Bull
Bear
Run by a manager with a strong track record for outperforming the benchmark and peer group
Europe is extremely out of favour at the moment, and the outlook is far from settled
Decent yield and 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 Highest gearing in the sector, could mean trust struggles in a downward market
Continue to Portfolio
2022 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

18 May 2022 Riding out the storm
We look at trusts with tightly governed discounts which may appeal to investors in volatile markets…
09 Sep 2021 What next for European equities?
After a strong period for European equity markets, we ask whether this trend can continue…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
07 Jan 2021 Fund Analysis
FEV offers investors a balanced exposure to European equities, with a strong performance record and dividend yield…
04 Nov 2019 Fund Analysis
Having been at the helm of the portfolio for over eight years, Sam Morse has proven himself as one of the better managers in the European sector…
24 Apr 2019 Nothing compares to EU
Currently one of the financial world's most unloved regions, we look at the sectors that are unique to Europe and how the persistent pessimism has presented attractive opportunities…
28 Nov 2018 Every cloud...
The endless grinding negativity of Brexit has driven investors away from Europe in scores, leaving rich pickings for opportunistic buyers...
26 Nov 2018 Fund Analysis
Fidelity European Values aims for long-term capital growth via a portfolio of European equities, managed with a conservative stockpicking approach...
26 Jul 2017 En Garde!
Europe is on the front foot, but investors are complacent about risks to the recovery in the longer term...
19 Jun 2017 The investment trust advantage...
Our event in June saw eight of the UK's most experienced fund managers discuss the outlook for each major asset class...
12 Jun 2017 Fund Analysis
21 May 2017 Brave new world
We ask the top managers in each sector, region and asset class where they see the opportunities in the months ahead...
18 Sep 2016 Fund Analysis
16 Sep 2016 Bargain hunt
Political chaos in Europe provides an opportunity to acquire exposure to some of the world’s largest multinationals at a significant discount...
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