“I have been to a number of its locations across multiple countries; I very much have a view on the financials and the detailed analysis of that company, just as I would a £200m marketcap company,” he explains.
“The same is true for [cruise operator] Carnival, which is a very big business, but at its heart is a reasonably simple one. The big difference comes on some of the really complicated mega-caps.
“If you look at Shell or HSBC, you are across multiple countries and multiple business segments, and I am definitely not on top of the intricate financials and moving parts of those companies as I would be on some of the smaller companies.”
Still, being at Fidelity means Wright has a whole bank of analysts to assist him, and a big area of opportunity that has been highlighted is in financials, which make up around 36% of the fund at present. Within this is a 7% overweight to banks, including Lloyds, HSBC, Barclays, Citigoup and Bank of Ireland. This clearly fits with his stated approach of investing in unloved companies, where there is potential for positive change. “A number of highprofile investors have made it clear they still regard the banking space as uninvestable because they find it difficult to analyse what is going on from both a business and regulatory point of view,” he says.
Tackling risk
While regulation is inherently unpredictable, Wright believes it is still discounted in the stocks, despite the In terms of underweights, Wright generally steers clear of large-cap defensive names – like many, he believes utilities and staples companies remain expensive, with low growth potential, high margins and few turnaround opportunities.
He does not own the likes of National Grid, Centrica, Unilever or Diageo, instead investing in more defensive mid-caps such as UDG Healthcare, HomeServe and Royal Mail.
Wright also likes to make extensive use of his permitted 20% allocation overseas – around 18% is international equities currently, including French pharmaceutical giant Sanofi and US-quoted Electronic Arts, which has been a big contributor to fund performance.
Turnover in the fund is around 60%, with an 18-month average holding period, though Wright says this can be variable and some new positions have been sold out of quickly for failing to meet due-diligence requirements.
“Other times I might own a stock for five years if I think it is still undervalued and the change has not come through,” he says.
