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Read: Fidelity Select Funds: Best, Worst, and 2014 Forecast
Fidelity Select Funds: Best, Worst, and 2012 Forecast
Sam Subramanian PhD, MBA
Year 2011 is ending on a down note. With just a few more trading days to go, Fidelity Select Biotechnology Fund (FBIOX) with a year-to-date return of 12% leads the performance table for Fidelity sector funds.
Fidelity Select Pharmaceuticals (FPHAX) and Fidelity Select Utilities (FSUTX) trail Select Biotechnology with returns of 11% and 9%, respectively.
Investors have responded to macroeconomic headwinds and low interest rates by gravitating towards economically less sensitive sectors and higher yielding industries.
After taking honors as the best performing Select fund in both 2009 and 2010, Fidelity Select Automotive (FSAVX) finds itself at the bottom of this year's performance table having suffered a 30% loss.
And, given Select Automotive's sizeable gap in performance with other laggards like Fidelity Select Financial Services (FIDSX) and Fidelity Select Brokerage and Investment Management (FSLBX), Select Automotive stands a good chance of ending up as 2011's worst performer.
The 42% spread between the year's best and worst performing Fidelity Select fund is similar to the 40% spread in 2010 ... but with a twist.
Fidelity Select Biotechnology was included in AlphaProfit's model portfolios in 2011. AlphaProfit's proven process selected the year's best performing Fidelity Select Fund in 2010, 2009, 2008, 2005, 2002, 2001, 2000, and 1999 as well.
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In 2010, none of the Fidelity Select funds lost money.
This year, there are quite a few losers. Twenty-eight of the 41 Fidelity sector funds are now under water.
For the second straight year, the spread between the best and worst performing Fidelity Select funds is uncharacteristically narrow from a historical perspective.
During the past 12 years, the best performing Fidelity Select Fund has on average gained 71% more than the worst performing Fidelity Select fund.
The spread was highest in 2009 at 120% when Fidelity Select Automotive gained 122% and Fidelity Select Consumer Finance (FSVLX) gained 2%. The spread was narrowest in 2006 at 35% when Fidelity Real Estate (FRESX) gained 33% and Fidelity Select Medical Delivery (FSHCX) lost 2%.
Best Fidelity Select Funds: 2012 Forecast
So, what will be the best Fidelity Select Fund in 2012? The answer to this question is arguably more challenging this year than it normally is.
Why? Because it requires investors to make correct calls on:
- What will happen to the Euro zone? Stay intact, stagnate, or splinter?
- When will the continental economies resume growth?
- Will the U. S. economy continue to grow?
Industries from economically less sensitive sectors such as consumer staples, health care, and utilities dominate the top of the year-to-date performance tables.
Commonly used sector selection methods that rely solely on relative strength will likely favor defensive groups in the market milieu.
And, herein lies the risk in such selections. See: Fidelity Select Funds: Choose the Best Fidelity Sector Fund Consistently
Defensive groups currently favored by relative strength-based systems are likely to work well only as long as macroeconomic concerns weigh on stocks.
As such, my wager is on Fidelity Select Utilities for the early part of 2012.
As the year wears on other factors can come into play.
Emerging nations including China can pep their economies with interest rate cuts.
In the U. S., 2012 is an election year. Additional measures to stabilize the housing market and spur job creation are a distinct possibility.
In such scenarios, economically sensitive sector funds like Fidelity Select Industrials (FCYIX) and Fidelity Select Consumer Discretionary (FSCPX) can trounce defensive sectors and emerge as leaders.
AlphaProfit Fidelity Select Fund Portfolios
Now, more than ever one needs a flexible, multidimensional sector evaluation and selection process ... one that can maintain the right mix of defensive and offensive sectors not only at the start of 2012 but one that anticipates changes and latches on to emerging leaders in a timely manner through 2012.
AlphaProfit's Valum investment process offers just that. This process has consistently selected the best Fidelity Select funds to enable the AlphaProfit Premium Service and model portfolios to bag Hulbert Financial Digest's #1 rank 12 times.
Performance of Fidelity Focus and Fidelity Core mutual fund model portfolios as of September 30, 2014.
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A dollar invested in AlphaProfit's Fidelity Aggressive Growth (Fidelity Focus) and Fidelity Capital Appreciation (Fidelity Core) model portfolios is worth $48.48 and $24.35, respectively.
This implies annualized returns of 20.6% and 16.6%, respectively.
Comparable investments in the Dow Jones Wilshire 5000 and S&P 500 benchmarks are worth $6.42 and $6.32, respectively implying annualized returns of 9.4% and 9.3%, respectively.
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AlphaProfit MoneyMatters is a free e-letter distributed to registered users of AlphaProfit's website. The e-letter analyzes the economy, markets, and sectors and provides money-making insights on stocks, exchange-traded funds, and mutual funds.
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