Bestinvest says
This fund achieved fame under original manager Anthony Bolton, his near 30 years of strong performance making him a hard act to follow when he stepped down in 2007. Sanjeev Shah, who Bolton groomed, fully replaced him in 2008. After a reasonable start, Shah's investment strategy has started to come under pressure. Therefore until there is further evidence that his strategy is starting to regain market traction, we advice that investor's treat this fund with more caution; especially as the contrarian approach can lead to performance substantially different to the index when the manager's stocks are out of favour.
The fund invests in UK companies of all sizes, though it typically has a bias to mid and small cap stocks. The manager has a broad definition of special situations, including opportunities to buy assets on attractive valuations, underperforming companies with recovery potential, companies with bid potential and companies with new technology and new issues for example. He adopts a contrarian approach, often buying stocks that are out of favour with the market and even with Fidelity's in house analysts, and is prepared to hold them for the long term in order to realise value. As a result the portfolio can differ sharply from the index. He uses a wide range of techniques to select stocks, including fundamental analysis , company meetings, quant screens and technical analysis, as well as feeding off Fidelity’s analysts. The manager also makes use of derivatives to enhance returns - in the past he has shorted stocks, sold call options (a strategies for making money from falling shares) and bought and sold index puts (index protection). The manager describes the process as 90% bottom-up (individual stock selection), with a sector/macro-economic overlay used to ensure portfolio exposures match his conviction levels.