Fidelity Select Funds: Best, Worst, and 2015 Forecast
Sam Subramanian PhD, MBA
Although stocks are down this month, large-cap U. S. stocks are likely to close 2014 with a gain.
With just a few more trading days left, Fidelity Spartan 500 Index Fund (FUSEX) that tracks the S&P 500 index ($SPX) is up 10.4% for the year.
Twenty-nine of the 42 Fidelity sector funds are in the black in 2014.
Fidelity Select Electronics (FSELX) and Fidelity Select Biotechnology (FBIOX) with year-to-date returns of 33.9% and 33.6% respectively are vying to end as the year's best performer.
Fidelity Select Health Care (FSPHX) and Fidelity Select Transportation (FSRFX) follow them with gains of 31.2% and 29.2%, respectively.
Commodity-oriented funds crowd the bottom of 2014's performance table. Fidelity Select Energy Service (FSESX) is down 29.2% this year and is likely to end as the year's worst performer.
Fidelity Select Natural Gas (FSNGX), Fidelity Select Energy (FSENX), Fidelity Select Natural Resources (FNARX), and Fidelity Select Gold (FSAGX) are all in the red.
AlphaProfit's multidimensional sector evaluation and selection process has consistently selected top Fidelity Select funds to enable the AlphaProfit Premium Service and model portfolios to bag Hulbert Financial Digest's #1 rank multiple times. See: Fidelity Select Funds: Choose the Best Fidelity Sector Fund Consistently
Fidelity Select Electronics was included in AlphaProfit's model portfolios in 2014. AlphaProfit's proven process selected the year's best performing Fidelity Select Fund in 2013, 2012, 2011, 2010, 2009, 2008, and 2005 as well.
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During the three-year period ending November 30, 2014, AlphaProfit's Capital Appreciation (Fidelity Core) and Aggressive Growth (Fidelity Focus) model portfolios gained at compound annual rates of 24.5% and 23.6%, respectively.
The Fidelity Core and Focus model portfolios have both outperformed the 20.9% annualized gain of the S&P 500 during this three-year period.
A dollar invested in AlphaProfit's Fidelity Focus and Fidelity Core model portfolios in 1994 is worth $44.97 and $24.08, respectively.
This implies annualized returns of 19.1% and 15.7%, respectively.
Comparable investments in the Dow Jones Wilshire 5000 ($DWCF) and S&P 500 benchmarks are worth $6.34 and $5.99, respectively implying annualized returns of 8.9% and 8.6%, respectively.
Performance of Fidelity Focus and Fidelity Core mutual fund model portfolios as of September 30, 2015.
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2015 Stock Market Forecast
Following a weather-impacted 2014 first quarter, U. S. gross domestic product has expanded at annualized rates of 4.6% and 3.9% in the second and third quarters, respectively. This marks the best back-to-back growth since late 2003.
Monthly job creation has exceeded 200,000 for 10 straight months.
Confidence in the sustainability of this economic expansion allowed the Federal Reserve to complete its bond purchase program in the fourth quarter as planned.
Now, sluggishness in the euro zone economies as well as Japan and China is threatening to dampen U. S. growth while the Fed ponders on raising interest rates in 2015.
Given the above, growth rates recorded in the second and third quarters of 2014 are likely to mark the high points of this expansion.
While the U. S. is likely to continue growing in 2015, the pace of growth in the fourth quarter of 2014 and in 2015 is likely to be in the 2.0% to 3.5% range.
This suggests stock prices are likely to be more volatile in 2015 than they have been in 2014.
Investor's appetite for risk is also likely to diminish next year compared to this year.
Stocks are likely to correct over 10% at some point in 2015, which is something they have managed to avoid in both 2013 and 2014.
That said, an expanding U. S. economy should provide many opportunities for investors willing to engage in selecting & timing investments necessary to offset the challenges posed by a narrower group of stocks advancing in price compared to 2014.
Best Fidelity Select Funds: 2015 Forecast
Looking ahead to next year, AlphaProfit's sector selection process rates the information technology sector among frontrunners for best performing investments.
Technology companies have several factors going for them.
First, businesses are now receptive to spending on capital equipment as confidence has improved.
Second, consumer spending on technology gadgets is healthy as the number of unemployed continues to shrink.
Last, many technology companies have cash-rich balance sheets. This provides them the means for pursuing acquisitions, buying back shares, and increasing dividends.
In this milieu, a sector fund like Fidelity Select Technology (FSPTX) can deliver decent gains. However, specific industries in the information technology sector can provide higher returns at lower volatility.
On a concluding note, energy and other natural resource stocks are in the midst of a steep decline as 2014 closes.
While it is too early to call the bottom in commodity-related stocks, the odds of this space providing tactical investors a tradable rally in 2015 should increase if growth ticks up in China and other emerging markets.
As such, it is worthwhile keeping an eye on Fidelity Select Energy and Fidelity Select Natural Resources.
To get timely recommendations of best Fidelity funds and AlphaProfit's Fidelity Core and Fidelity Focus model portfolios, subscribe to AlphaProfit Premium Service now.
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About AlphaProfit MoneyMatters and AlphaProfit
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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