Fidelity's 3 Fund Picks for Value Investors

Looking for long term growth? Value stocks will outperform in 2017, according to Fidelity's Nick Peters. He picks three funds in the UK, US and emerging markets

Emma Wall 16 December, 2016 | 10:48AM
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This article is part of Morningstar's Guide to Alternative Investing; providing everything you need to know about property, commodities, infrastructure and other diversifying assets. 



Emma Wall: Hello, and welcome to Morningstar. I'm Emma Wall and I'm joined today by Nick Peters, to give his three fund picks. Nick is Fidelity Multi Asset Growth Fund Manager.

Hi, Nick.

Nick Peters: Hi.

Wall: So, what's the first fund you'd like to highlight today?

Peters: So, the first fund is a U.K. fund run by Alex Savvides, JO Hambro, the JO Hambro UK Dynamic Fund. He is a value investor and I do think that over the next 6 to 12 months we're likely to see value stocks continuing to run strongly.

They've had a very poor period of performance relative to growth stocks and I think he is a strong investor. He has a clear process. He looks for value stocks that generate cash over time and have the potential or do pay a dividend. And I think they are the sort of stocks that investors will be looking at over the coming quarters.

Wall: Because the stocks that have turned well over the last couple of years are no longer going to be the stocks that do well over the next 18 months, are they?

Peters: Well, I wouldn't like to be categoric in that answer, but I do think that you've seen such a strong run and you've seen that style reversing and I do think that it's likely to continue given the valuation discrepancy between one style and the other.

Wall: What's the second fund you'd like to highlight today?

Peters: So, again, it's another value fund and this time in the U.S. and it's run by a firm called Hotchkis & Wiley and they have a value approach. Unlike Alex, where he is effectively picking stocks himself or with a small team, this is a much larger team and a team of analysts who recommend stocks that a portfolio manager will then select from a buy list, if you like, but a strong value resource. They have a strong exposure to financials at the moment and U.S. financials have lagged in relative performance to other areas. So, if we see the value stock continuing to run, that fund should do well.

Wall: And the U.S. is famously an area where it's quite difficult for an active manager to add outperformance. But I suppose when it comes to a distinct style bias, this is the sort of thing which will pay off?

Peters: Yeah. So, our approach within Fidelity Multi Asset is to select managers who perform well against their style benchmark. So, yes, I think now is the time to really pick those managers because they are likely to do well in this sort of environment.

Wall: What's the third fund?

Peters: So, for the third fund I've selected a Fidelity fund, Emerging Markets, run by Nick Price. And to be honest, he has had a poor year this year. His quality growth approach has really been left behind by again that strong run in value areas such as materials, energy and financials. But he is a very, very good fund manager. He is obviously supported by a strong research team. And so, I do think over time the performance will come through. You probably will have to be a bit more patient with the manager, but he is a good fund manager.

Wall: Nick, thank you very much.

Peters: Pleasure.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Fidelity Emerg Mkts Retail A Acc209.24 GBP1.32Rating
JOHCM UK Dynamic B Acc3.91 GBP0.44Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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