BlackRock UK Special Situations fund

Andy Parsons, head of investment research at The Share Centre, discusses the benefits of contrarian investing and highlights the BlackRock UK Special Situations fund.

"By the very nature of its title, investors need to appreciate that this fund will generally hold those companies that are perceived to be undervalued relative to their growth potential or have recovery prospects.

"Unlike many other UK Special Situations funds, this fund, managed by Richard Plackett, aims to offer investors a portfolio split between large cap and small to medium stocks in order to achieve the fund's objective of capital growth. The very nature of attempting to provide this split differentiates the fund portfolio from a more general special situations fund, which tends to focus solely on small to mid-cap companies.

"The portfolio is reasonably concentrated, holding around 60 stocks. Selections are based on ideas Richard believes are undervalued relative to their cash position or in a recovery situation where there is conviction and belief in the management. Overall, the portfolio will broadly hold around 40% in FTSE100 companies with the remaining 60% held in small to mid-cap stocks, with the caveat that at least 50% will always be in small to mid-cap stocks.

"Richards looks to identify those high quality stocks with sustainable growth potential, good management, strong balance sheets, a proven long term track record, and that are cash generative. It is companies such as these that he believes can be better equipped to deal with the current volatile economic situation. As the UK economy remains tough, Richard believes the best opportunities are likely to come from companies with international exposure, especially emerging markets. Top holdings within the current portfolio include Spirax-Sarco, HSBC, Royal Dutch Shell, AVEVA Group and Vodafone."