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Fidelity Special Sits 3 Stock Picks - YouTube
Channel: Morningstar Europe
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hello and welcome to Morningstar I'm
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Emma war and I'm joined today by Alex
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Wright manager of the fidelity to social
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situations fund to give his three stock
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picks hi Alex
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hi so what's the first stop you'd like
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to highlight today my first stock pick
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is Pearson it's a name that we've built
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up over about an 18-month period and
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it's something I'm still very excited
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about I think it's one of the few stocks
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where there's a massive gap between sort
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of the reality of what the company is
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and the perception of what it is so
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there's a huge amount of negativity out
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there a lot of people on the sell side
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at brokerage houses have celebrating on
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the stock quite a lot of short interest
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from hedge funds and that's because
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there's flux in the marketplace there's
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a big digit analog-to-digital
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transmission going on and I think
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Pearson is doing well at navigating that
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and that will result in a much more
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predictable much steadier in a much
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higher margin business over time and
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they are the global market leader in
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education a market which grow
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structurally so I think that could be a
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stock which would attract a very high
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multiple like a technology company would
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and it's only trading on about 15 times
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earnings now the reason people that like
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it is that is a painful transition it's
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costly there's been a lot of investment
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done and also cyclically things have
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been bad so people don't go into
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education when the economy is strong and
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the economy's been extremely strong
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particularly in the the core US market
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but now that market is reaching full
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employment I think that cyclical drag
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drops away in that structural story can
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really show out over time so very
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excited about that idea and what's the
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second stock pick the second stock I
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wanted to talk about is Phoenix group
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it's an insurance company it's quite
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unusual in that it primarily doesn't
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write new business it's actually a
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closed book consolidator in the life
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space so a lot of people have bought
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annuities over time and and have
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insurance products that are owned big
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back books and Phoenix what they're
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doing because rules have changed over
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time solvency too has come in made it
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harder for businesses which aren't at
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scale in that industry is there
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consolidating up those back books of
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largely closed business and they've done
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a very large acquisition over the summer
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and from Standard Life Aberdeen taking
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their bat book or
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so again transforming that business and
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I think that's a really good acquisition
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so it's the biggest deal that they've
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ever done it's a business the way
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there's an awful lot of integration and
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cost to squeeze out of that book bit
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because it is so large compared to their
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base business and I think that really
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gives you much more visibility and what
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is a 7% dividend yield so I think a very
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attractive valuation in business which
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is largely already written with a lot of
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cost cuts to come from that new
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acquisition because it's a closed
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business does that mean it has a shelf
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life as a stock I mean presumably it's
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not one you're gonna be holding him in
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20 years time you're right so this
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company in over 20 years if they don't
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do any further deals
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you're basically going to get all the
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cash returned to you so there won't be a
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company so it's interesting it there's a
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lot of certainty of those cash flows but
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obviously that the cash flows will run
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out over time so you wouldn't expect a a
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3/4 percent dividend yield like the
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market but actually because you're
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getting all that cash back I think that
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that level of dividend yield is very
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attractive what's the third and final
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stock the third stock I wanted to talk
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about is CNC script group a more mid-cap
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idea from the fund that I've increased
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the position in dramatically recently
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they recently bought the Matthew Clark
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assets they bought those out of
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administration after conviviality and
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went bankrupt over the weekend near
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Easter I think that's a very good deal
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as generally deals from administration
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are it's an asset that they tried to buy
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but were outbid substantially a number
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of years before by conviviality and I
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think there's a lot of synergy for them
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because they already have a big
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distribution business in the UK but also
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a very large one in Scotland and Ireland
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so their purchasing is dramatically
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increased also they've got their own
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side brands that they can put through
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that and I think it really transforms
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the business and you're only paying
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about 12 times earnings for that
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business so alo multiple for something
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that's dramatically improved in quality
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Alex thank you very much thank you this
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is Emma wall for Morningstar thank you
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for watching
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