Fidelity Special Values’ (FSV) fund manager Alex Wright warns the UK stock market has hit its peak, arguing it is trading ‘around its
long-term average’ with many stocks on peak margins.

‘I believe this constrains the ability of the overall market to continue to make above-average returns in the future, and leaves it more vulnerable to a shock,’ comments Wright.

Global markets have been volatile this year amid concerns over interest rates, high valuations and a potential trade war.

Wright advocates seeking cheap companies with improving fundamentals that have a good shot at beating the market over the next few years.

Fidelity Special Values aims to deliver long-term capital growth by investing in smaller, medium and larger-sized UK stocks.

Among its top holdings are Lloyds (LLOY) and rare diseases business Shire (SHP).

Wright says there are many stocks ‘deeply out of favour’ but not beyond recovery, including education publisher Pearson (PSON).

He is confident Pearson has recovery potential after struggling with lower demand for pricey academic textbooks in the US.

Looking ahead, the fund manager says focusing on individual companies is vital instead of becoming distracted by political rhetoric or economic uncertainty.

Over the last five years, the fund has generated 15.3% in annualised total returns. (LMJ)

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