Fidelity European Values (LON:FEV) recently celebrated its 25th anniversary. It aims to generate long-term capital growth from investment primarily in continental European equities, although up to 20% of gross assets may be invested in companies outside the FTSE World Europe ex-UK benchmark. Since January 2011, FEV has been managed by Sam Morse, who uses a bottom-up process to select companies that have solid fundamentals and are able to grow their dividends over a three- to five-year horizon. FEV’s NAV total return has outperformed the benchmark over three, five and 10 years. Revenue earnings are fully paid out as an annual dividend; the current dividend yield is 1.8%.
Investment strategy: Searching for dividend growth
Manager Sam Morse follows a bottom-up stock selection process, aiming to invest in companies with attractive valuations, positive fundamentals, strong balance sheets, solid cash flow generation and the ability to grow dividends over a three- to five-year horizon. FEV’s portfolio typically contains 55-60 holdings; it is diversified by industry and geography, although weightings versus the benchmark are unconstrained. Gearing is permitted via contracts for difference (CFDs); at end-November 2016, net gearing was 3.2%.
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