Tuesday newspaper share tips: Fidelity China Special Situations, Essentra
By Alexander Bueso
Date: Tuesday 22 Nov 2016
(ShareCast News) - Fidelity China Special Situations rode the wave of Chinese consumption growth higher this year, vindicating the original strategy put in place by Anthony Bolton and is now a buy, according to The Times´s Tempus.
Unfortunately, success required that investors remain patient, with the 80,000 small investors who followed Bolton into the Middle Kingdom in 2010 suffering a rocky first couple of years.
Bolton´s successor, Dale Nicholls, continued to invest in the likes of Alibaba, but it is smaller stocks where he has done especially well, the tipster explained.
Among the companies targeted by FCSS are BMW dealerships to private education providers, but all focused on the Asian giant´s burgeoning middle class.
Nicholls has also taken on some "meaty conviction positions", disregarding banks completely and even short-selling some property firms, Tempus said.
As ever, Capitalism in a one-party system is a contradiction, but FCSS is now trading at a 15% discount to its net assets, versus the 10% premium they sported in the days gone by of Bolton.
"Buy. WHY? Gives actively managed exposure to world's second biggest economy at a hefty discount," Tempus said.
Essentra´s latest profit warning can be explained in part by factors largely out of management´s control, but the firm´s multiple self-inflicted wounds means the shares are best avoided.
Among said factors are Beijing´s clampdown on smoking and the drop in the oil price, which hurt the firm´s pipe protection technology arm.
However, Essentra has nobody but itself to blame for the problems integrating the specialist packaging business it picked up from US-baed Clondalkin Group a couple of years ago.
"Avoid," Tempus concluded.
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