As 2019 gets underway, Tom Stevenson, investment director for Personal Investing at Fidelity International, picks his four funds for this year:
“2018 proved to be a challenging year for investors and many investors predict more of the same in 2019. While there may be little prospect of markets rising strongly over the next 12 months, in the absence of recession (which is unlikely, I think), and with valuations far from stretched, there is no reason to expect a meaningful correction either. The fourth quarter volatility has created some compelling value in a number of markets.
“I have focused my picks this year on the markets that I think are unfairly out of favour, although these are not necessarily the ones that have fared worst in 2018. I am not, for example, jumping back into the Asia Pacific region just yet because the trade outlook is too uncertain. China would be a bold contrarian call today, but it is too risky for my liking.”
Lindsell Train UK Equity Fund
“The UK market is massively unloved at the moment for obvious reasons. As I write, the Brexit situation is extremely fluid with a wide range of outcomes still possible. Because of this, investors are largely shunning UK assets and valuations have, as a consequence, reached very interesting levels. The yield on the FTSE 100 at 4.6pc is compelling in an environment of lower-for-longer interest rates.1
“Despite my enthusiasm for the UK, I am not going the whole hog and recommending a cyclical, value fund or one biased towards the domestic stocks that have been hit hardest by Brexit concerns. Rather, I am sticking with Nick Train’s growth and quality focus. This should provide some protection if things do not turn out as I hope for the UK but will capture plenty of the upside if 2019 turns out better than feared.
The Lindsell Train UK Equity Fund has not been immune to recent market volatility and this feels like a good entry point into this highly-concentrated fund packed with excellent buy and hold stocks.”
Fidelity Global Dividend Fund
“In keeping with my more defensive approach this year, I am switching from Jeremy Podger’s Global Special Situations Fund to the cautiously-managed Fidelity Global Dividend Fund. Run by Dan Roberts, this fund invests in resilient businesses that can offer the prospect of long-term income growth and capital protection.
“Global Dividend is well diversified and defensive, tending to perform well when recent hot sectors like technology do not. With a focus on high-quality, growing dividend streams, the fund is also designed to protect against rising inflation. It feels like 2019 could be this fund’s year.”
Baillie Gifford Japanese Fund
“Having reached a 27-year high in January 2018, the Japanese Topix index has performed poorly ever since.2 In part that reflects moderating global growth expectations and anxiety about the trade situation to which the Japanese economy is vulnerable. But investors have become too pessimistic about Japan, in my view.
“The prospect of recession in Japan this year is slim, profits continue to grow and the price investors are willing to pay for that growth has reduced. The Bank of Japan remains supportive, deflation fears have largely evaporated and a number of structural reforms are making Japanese companies more shareholder-friendly.
“The Baillie Gifford Japanese Fund is a good way to play recovery in Japan. Managed by Matthew Brett, the fund has a focus on technological change, particularly robotics and factory automation, an area in which Japan has a big competitive advantage.”
Fidelity Select 50 Balanced Fund
“The three funds already recommended are all to be found on Fidelity’s Select 50 list of our favourite investments. Earlier this year we developed a new one-stop way of accessing the funds on this list via a balanced fund that uses the list as its starting universe of investment opportunities.
“Investing across different asset classes and all around the world, this fund, managed by Ayesha Akbar, has navigated a steady course through 2018’s volatile markets. Ahead of another uncertain year, that stability is likely to remain a big attraction in 2019.