Out of fashion? Don't ignore future prospects

Seeking out unfashionable shares could help you reap rewards. If they are at a low point, they're unlikely to slump much further but If they recover, investors can make decent profits, writes Simon Read.

The problem is in identifying languishing shares that have considerable potential. But two Fidelity fund managers have picked four unfashionable stocks that they predict are set for a revival: Mothercare, Speedy Hire, Lloyds Bank and Ladbrokes.

Investing in a retailer in a year which has seen a string of them go bust – including HMV, Jessops and Blockbuster – may seem unwise but Alex Wright, of the Fidelity UK Smaller Companies fund, says: "Following a change in management Mothercare has a credible strategy to reduce costs and return to profitability."

As for Speedy Hire, he points out: "There was a lot of negativity around the stock that meant you could buy its shares for less than the value of its equipment."

When it comes to Lloyds Bank, Sanjeev Shah of the Fidelity Special Situations funds says: "It's an example of a company where negative publicity obscures what could be a profitable future."

And Ladbrokes? Shah predicts the bookie is heading for a "period of positive change".