Last Friday, Anthony Bolton completed 20 years as a fund manager at Fidelity. He originally arrived ...
Last Friday, Anthony Bolton completed 20 years as a fund manager at Fidelity. He originally arrived at the company on 17 December 1979, the day that the Fidelity Special Situations was launched, a fund he has been managing ever since.
This day also marked the establishment of Fidelity in the UK, as three other unit trusts were launched alongside Special Situations. They were American Trust, Gilt & Fixed Interest and Growth & Income.
Before joining Fidelity, Bolton ran a special situations fund at Schlesingers, a South African private investment group. Twenty years on at Fidelity, he now runs five funds, including Special Situations.
They are Fidelity Special Values investment trust, launched in November 1994, which is run with the same portfolio as Special Situations, and Fidelity European, launched in November 1985, which Bolton has run since inception, along with an investment trust version, Fidelity European Values, which launched in November 1991.
The fifth fund is the European Growth Sicav, part of the Fidelity offshore fund range domiciled in Luxembourg.
During the last 20 years Fidelity has grown from being a small investment house to one of the top Pep and Isa providers in the UK.
Jane Wallace spoke to Bolton about the last 20 years at Fidelity, his outlook for the year 2000 and what might happen in the next 20 years.
What was life like at Fidelity when you started?
There were just two investment managers in London, including myself, and we operated on our own.
Now there are about 50 analysts and a big team of portfolio managers. We also used to do all our own dealing but that is centralised now. Obviously the technology has changed as has the way information is delivered.
Then we had no internal research resources, so we were much more reliant on broker notes at the start.
The big change has been the building of the analyst team and more regular meetings with companies. We have two or three meetings a day with companies now which we never had before. Also the fund was much smaller in those days, so I was running a more concentrated portfolio.
What was happening in the economy?
Margaret Thatcher had just been elected, it was the beginning of the 1980s and the economy was in recession.
How are things different now?
The amount of information and the speed at which it is delivered has changed dramatically. There is no problem today in getting information but interpreting it is key, because information on its own is no good unless you can make use of it. There are also more opportunities to meet companies and they are much more accessible. That is certainly the case in continental Europe, where 10 to 15 years ago hardly any foreign investors visited those companies.
After 20 years the market hasn't become much more efficient. In certain areas it has. But even today, if you look outside the leading companies, there are amazing value opportunities where share prices are cheap compared to the value of the business franchise. But there are more pressures and fashions, for example the move to investing just in large cap stocks. Institutions are now so occupied by working out if they should be in big companies or not that they miss opportunities. Some say - 'we'll sell out of everything below a market cap of £200m' - regardless of whether the companies are good or bad. There are as many anomalies today as there ever have been.
Can you explain your investment philosophy?
It is value-oriented. I look where others are not looking for stocks or where they have discarded them, to find companies which are overlooked or misvalued and which have attributes which will reinterest investors in the future. It is a contrarian style, and means I spend most of my time outside the largest companies. Stocks which are overlooked or undiscovered are less likely to be in the big cap arena.
Most of what I buy falls into four or five different groups. One is recovery stocks - with evidence of genuine change. We don't just buy them because the share price has gone down.
Then there are undiscovered growth stocks, or growth stocks which I like but stand outside the popular growth sectors which everyone knows and loves.
I also buy stocks which are selling at a discount to their assets and controversial stocks, like tobacco or gambling which are not to everyone's taste. Also those stocks which have a greater likelihood of corporate activity than average.
That might be because the sector is consolidating, or the shareholder structure is such that the company is more exposed to a takeover.
The latter category has been particularly important recently. In last year there have been 28 bids in the Special Values investment trust portfolio - an unprecendented number.
It is a bottom-up approach. I don't take views on the economy and am always fully invested. That can mean that I have difficult periods when the economy is in recession.
How does that relate to investment ideas?
One example is Alpha Air, which is involved in airline catering and also has services for airports. A large shareholder is expected to sell out at some stage, and it has been hit by negative sentiment that affected other airline retailing stocks on the demise of duty free, so it is very cheaply valued.
However, it is really a support service stock and not dissimilar to catering company Compass Group, but is valued much more cheaply. It has the potential to be rerated as highly as Compass Group.
Do you use a benchmark?
Yes I look at the All Share. My portfolio, there are about 170 stocks in Special Situations and about the same in Special Values, looks completely different from the index. In the short-term, performance can be lumpy, as my fund can have a good year and then a poor year, but over the longer term it can produce higher returns.
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