FE Alpha Manager Alex Wright is commonly viewed as one of the brightest talents in the fund management industry thanks to his value/contrarian approach and his proven stock picking abilities. 
FE data shows he is the best performing FE Alpha Manager over three, five and seven years thanks to his work on the five crown-rated Fidelity UK Smaller Companies fund, which he launched in February 2008.
During his career, Wright has returned 297.08 per cent to his investors meaning he has beaten his peer group composite by close to 200 percentage points.
Performance of manager versus peer group composite since Feb 2008
Source: FE Analytics
As a result of his sterling work on his small-cap fund and his Fidelity Special Values IT, Fidelity handed Wright its flagship Special Situations fund in January 2014 following the departure of Sanjeev Shah.
While the five crown-rated Special Sits fund, which is £2.9bn in size, got off to a rocky start in 2014 Wright has since turned around its performance as the portfolio is now top decile in 2015 and comfortably beating the FTSE All Share.
In this article, the manager – whose investment strategy revolves around buying unloved and bombed-out companies and holding them until their potential value is recognised by the wider market – tells FE Trustnet which stocks he has been buying and selling within his highly-popular fund.
CRH
Wright’s major purchase has been CRH, which is listed on the FTSE 100 and is the parent company of diversified building materials businesses which are engaged in the manufacture and supply of a wide range of building materials and the operation of builders’ merchanting and DIY stores.
“It is now about a 2.5 per cent position. There is both a cyclical and structural change happening here as it is a company where there is both an internal and external change which is exciting to me,” Wright explained.
“The first is an industry change in terms of very depressed construction markets across Europe and also in the US where margins are still below peers and you are seeing that cyclical recovery.”
“Then within CRH itself, it has been able to take advantage of a forced disposal from some of their rivals Lafarge and Holcim and buy into some very high quality assets that have a lot of synergies with their existing business.”
“There is real step change potential for CRH in terms of its margins going forward given that large purchase.”
According to FE Analytics, following a difficult year for the stock in 2014, shares in CRH are up close to 25 per cent so far this year.
Performance of stock versus index in 2015
Source: FE Analytics
FE data shows that there are nine funds in the Investment Association universe which count CRH as a top 10 holding and they include Lazard UK Omega, BlackRock European Dynamic and Threadneedle Pan European Focus.
Ultra Electronics
Next on the list is Ultra Electronics. Wright has been buying the FTSE 250-listed defence, security, transport and energy company due to its recent acquisitions and as the manager believes the defence sector – which has been hit by a swathe of budget cuts – is due a rebound.
“Ultra is interesting in my opinion due to its position in the defence market. It is clearly a market that has been under pressure for the last five years or so with the falling defence budget. I think we are now towards the trough of those budgets and overall it is more positive industry backdrop.”
“Ultra itself is also on some interesting new programmes which ramp up particularly in 2016 and 2017 and has also been deploying its capital by buying other defence businesses. Again, I think there is a big benefit to come from the most recent acquisition they made a couple of weeks ago.”
Shareholders in Ultra Electronics have had a volatile past 12 months though, as the graph below shows, the shares have rallied over recent months thanks to its recent acquisitions.
Performance of stock versus index over 1yr
Source: FE Analytics
While it is a mid-cap stock, Ultra Electronics is very popular with UK managers as it is a top 10 holding in FE Alpha Manager Mark Martin’s Neptune UK Mid Cap and Neptune UK Opportunities funds and Fidelity UK Opportunities, which is headed-up by FE Alpha Manager hall of famer Leigh Himsworth.
Ladbrokes
As well as selling overseas stocks such as Ubisoft Entertainment and Delhaize, Wright has also taken an axe to his weighting in bookmakers Ladbrokes.
Shares in the FTSE 250 company have been on a very poor run over recent times thanks largely to the recent budgetary changes surrounding the taxation of betting machines. FE data shows that while Ladbrokes is up 19 per cent over just two months, it has fallen 41 per cent since its peak in March 2013.
Performance of stock versus index over 3yrs
Source: FE Analytics
Wright said: “Ladbrokes, unfortunately, is a stock that we have lost money on.”
“It’s a stock where the original downside protection was somewhat challenged by the big reduction in earnings they saw partly due to the change in taxation laws in the UK in terms of FOBTs [fixed odds betting terminals].”
“But also, I think the change online that I was looking for has been delayed as they have changed CEOs recently and I think that has increased the risk in the story so I have made that a much smaller position as it is now 50 basis points instead of 200 basis points.”
Unsurprisingly, no open-ended funds count Ladbrokes as a top 10 holding.