Five stocks for your stocking

With the festive season in full swing – and shoppers looking for some last minute gift ideas – a selection of Fidelity’s portfolio managers from across the globe highlight some of the stocks they would like to see in their Christmas stockings this year.

Alex Wright, Portfolio Manager, Fidelity Special Situations Fund

Vitec - If you’re a camera enthusiast, Vitec may be responsible for making some of the items on your Christmas list. Its key brand Manfroto is number one in camera accessories such as tripods and lights. The stock had suffered as the positive impact of consumers switching to digital SLR cameras – and making associated purchases – slowed down, which coincided with the tail-end of the replacement cycle in studio camera equipment. Looking ahead, increased use of both video and stills on the internet looks set to drive higher volumes over the long-term, especially live-streaming, direct to web, video products. Healthy consumer trends in the US, Vitec’s largest market, should lend strong support to this trend.

Angel Agudo, Portfolio Manager, Fidelity American Special Situations Fund

Best Buy - I believe this US consumer electronics firm represents good value following recent underperformance relating to concerns around market share losses. In my view, investors have so far failed to ascribe much value to the company’s recovery potential, despite the new management team taking a number of steps to improve execution around cost efficiencies, customer targeting and its online strategy. The company is also increasingly focused on its higher margin services, such as insurance, which should support profitability as we head into 2015. Overall, I believe the risk-reward profile is favourable given the attractive valuation of the stock and the generally supportive consumer spending backdrop in the US.

Dale Nicholls, Portfolio Manager, Fidelity China Special Situations PLC

Citic Securities - As China’s leading broker, Citic Securities is a key beneficiary of financial market reform, which is still in the early stage of development. It has strong underwriting skills in equities and bonds and should benefit as more and more companies look to the markets to raise funds, supported by increasing listing activity following the lifting of an IPO ban. Citic Securities is also well positioned to benefit from increased volumes due to the HK-Shanghai Stock Connect programme, higher margin finance and lower funding costs. It also owns China’s number one asset management company, China AMC, an asset that has been underappreciated by the market. Finally, it is also ahead of its peers in overseas dealings due to its CLSA franchise, which makes it well positioned for cross-border business.

Alberto Chiandetti, Portfolio Manager, Fidelity European Opportunities Fund

Autogrill - If you’re on the road this Christmas, you may be stopping off at Autogrill, an Italian company that is set to benefit from a significant restructuring programme going forward. The firm actually generates 70% of earnings (EBITDA) in the US, where there is a supportive cyclical tailwind due to solid economic growth and rising consumer confidence. With the euro likely to continue to weaken against the US dollar, a positive foreign exchange impact will likely provide an additional boost to Autogrill’s earnings. What is more, the stock currently looks cheap versus its sector and is trading on an undemanding multiple.

Anthony Srom, Portfolio Manager, Fidelity Asia Pacific Opportunities Fund

Sydney Airport - This is an asset with a robust business model and high barriers to entry, which is run by a high-quality management that are able to reinvest capital at incrementally higher rates of return. Key value drivers going forward are Australian and global GDP growth and an associated rise in outbound Asian travel, particularly from China given its close geographical proximity to Australia. Furthermore, the ability to use off-peak time slots more effectively, continued up-gauging in aircraft sizes, the potential to reconfigure the airport – and therefore spread peak hours more effectively –should allow Sydney Airport to utilize more capacity and grow passenger volumes for some time. Valuation is favourable and it has a sustainable dividend yield of over 5%.