Sanjeev Shah, manager of the Fidelity Special Situations fund, said many UK companies are attractively valued following the recent volatility in markets.

Shah, who took over management of the Special Situations fund from veteran investor Anthony Bolton, has highlighted some of the stocks that look more attractive, given the recent sell-off in markets.

The manager said some companies are now trading on low multiples and offer attractive dividend yields for investors in the current low interest environment.

Shah said, 'The current level of fear amongst investors is throwing up some outstanding investment opportunities for long-term investors despite the uncertain economic environment.

'In fact, the correction itself should not come as a surprise as the market was beginning to price in a fairly normal recovery from what has been an anything but normal global financial crisis. I had recently taken out some protection by buying puts when the market was above 6,000. These I have now sold when the market got to the 5,000 level.'

The manager remains negative view on the prospects for mining and basic materials companies, that have been trading at low price-to-book valuations and warned that they too would be hit by a slow-down in the global economy, despite being driven higher more recently by emerging markets growth.

He said, 'In this low-growth environment, I believe that companies which are able to demonstrate sustainable sales and earnings growth should be priced at a significant premium, which currently is not the case.

'These growth names, which can also be unloved and unfashionable, make up a significant part of the portfolio today.'

One stock favoured by the manager is BSkyB, despite the collapse of the takeover by News Corporation, as a leader in the pay TV market and 'solid pricing power'.

'I am also attracted to the mobile data theme, which is being fueled by the growth of smart-phones and tablets. I have exposure to this theme from material positions in stocks like Ericsson,' said Shah.

'I also like strongly-growing, pure online companies such as Moneysupermarket, IG Group and Ocado. Finally, I believe the emerging market consumer theme will continue for the next several years, which is why I am happy to have large positions in Burberry and L’Oreal.'

The fund manager has also upped his exposure to a potential long-term recovery in the US housing market, through companies such as Wolseley.

He added, 'This correction has also thrown up the opportunity to invest more aggressively in interest rate-sensitive stocks such as the UK’s general retailers.

'I continue to believe that interest rates will remain lower for longer and the pessimism surrounding the prospects for the UK consumer is very high. I have been adding to names such as Marks & Spencer and Home Retail Group and contin ue to have a core position in Kingfisher.'

Shah said media stocks 'remain a core part of the portfolio' with Financial Times publisher Pearson, adding that the market correction has seen opportunities in companies such as commercial broadcaster ITV.

The manager is also unafraid of the much unloved financials sector, seeing 'unprecedented value' in retail and commerical banking franchises, like Lloyds Banking Group, in which he has recently added to his existing position.

He said, 'Banks are the most underweighted sector for institutional investors and valuations are at multi-decade lows on the basis of pre-provision profits.'

Shah added, 'The fall in share prices has shaken investor confidence this summer but, for an investor who likes to go against the flow, this represents the best opportunity in more than two years to find new opportunities or to add to my positions.'

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