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Sam Subramanian

Will these Leading Fidelity Sector Funds and Sector ETFs Continue to Lead the Market?

Sam Subramanian PhD, MBA

Although threats lurk in the horizon, agribusiness, biotechnology, and semiconductor Fidelity funds and sector ETFs can continue outperforming near-term.

May was good for stocks in general.

Large-cap stocks as measured by the S&P 500 rose 1.3% while the Russell 2000 small-cap proxy fared better, rising 2.3%.

Sector funds shared the gains for good measure.

Led by the surge in biotechnology shares, health care funds and ETFs dominate the list of top Fidelity Sector Funds in May. Funds and ETFs focusing on the semiconductor group join the leaders as well.

Top Fidelity Sector Funds

Fidelity Select Biotechnology (FBIOX), Fidelity Select Electronics (FSELX), and Fidelity Select Medical Delivery (FSHCX) are the top three Fidelity sector funds based on May returns.

Fidelity Select Biotechnology, Fidelity Select Electronics, and Fidelity Select Medical Delivery led Fidelity sector funds in May

Source: Morningstar, AlphaProfit

Fidelity Select Biotechnology, Fidelity Select Electronics, and Fidelity Select Medical Delivery stood out among Fidelity sector funds in May.

Fidelity Select Biotechnology

Approach: Actively managed
Top holdings: Gilead Sciences (GILD), Biogen (BIIB), and Celgene (CELG) make up 20% of the fund.
Expense ratio: 0.74%

Fidelity Select Electronics

Approach: Actively managed
Top holdings: Intel (INTC), Broadcom (BRCM), and Qualcomm (QCOM) make up 32% of the fund.
Expense ratio: 0.78%

Fidelity Select Medical Delivery

Approach: Actively managed
Top holdings: UnitedHealth Group (UNH), Express Scripts (ESRX), and McKesson (MCK) make up 37% of the fund.
Expense ratio: 0.79%

Top Sector ETFs

SPDR S&P Biotech ETF (XBI), iShares PHLX Semiconductor ETF (SOXX), and Market Vectors Agribusiness ETF (MOO) are among the top sector ETFs based on May returns after excluding leveraged & inverse ETFs as well as ETFs with average daily trading volumes less than 100,000 shares.

SPDR S&P Biotech, iShares PHLX Semiconductor, and Market Vectors Agribusiness led sector ETFs in May

Source: Morningstar, AlphaProfit

SPDR S&P Biotech, iShares PHLX Semiconductor, and Market Vectors Agribusiness stood out among sector ETFs in May.

SPDR S&P Biotech ETF

Approach: Equally weighted index of about 100 biotech companies
Top holdings: Synageva BioPharma (GEVA), Sarepta Therapeutics (SRPT), and Alder Biopharmaceuticals (ALDR) make up 6% of the ETF
Expense ratio: 0.35%

iShares PHLX Semiconductor ETF

Approach: Modified market capitalization-weighted index of 30 semiconductor companies
Top holdings: Intel, Qualcomm, and Texas Instruments (TXN) make up 23% of the ETF
Expense ratio: 0.47%

Market Vectors Agribusiness ETF

Approach: Modified market capitalization weighted index of about 60 global companies in the agribusiness industry
Top holdings: Syngenta (SYT), Monsanto (MON), and Deere (DE) make up 25% of the ETF
Expense ratio: 0.57%

M&A Activity Drives Gains in Top Fidelity Sector Funds and Top Sector ETFs

The top performers in May benefited from deal activity in the agribusiness, biotechnology, and semiconductor industries.

In agribusiness, Syngenta shares surged 36% after Monsanto offered $45 billion for Syngenta and the latter rejected the offer.

In biotechnology, Synageva shares more than doubled after Alexion (ALXN) offered $8 billion for the former.

In semiconductors, Avago Technologies (AVGO) agreed to buy Broadcom for $37 billion sending its shares 29% higher.

What's Ahead for Top Fidelity Sector Funds and Top Sector ETFs

Merger appetite is strong as companies view deals as a means to grow revenue. Low interest rates and rising share prices make it less onerous for acquirers to finance deals.

Sector funds and ETFs focusing on agribusiness, biotechnology, and semiconductor industries can fare well in the near-term as deal activity stimulates additional ones.

Appetite for mergers can however cool when the Federal Reserve raises interest rates. This in turn can cause shares in leading groups to underperform. Likewise, the leaders are also likely to underperform when the broad market corrects or when valuation metrics in such groups become excessive.

AlphaProfit's Investment Selection Process

Impeccable timing and judicious risk management are keys for success with sector investing.

AlphaProfit evaluates sectors on valuation, momentum, and news quality. These metrics collectively ensure investments are attractively valued and have catalysts needed to sustain growth in future.

AlphaProfit's multi-pronged evaluation system increases the odds of consistently buying and exiting top Fidelity sector funds and top sector ETFs at the right time.

Fully 75% of investments selected by AlphaProfit have made money ... and this includes results during the 2008 financial crisis and the dot-com bust at the turn of the millennium.

The high percentage of winning investment selections translates into lower risk and higher return for AlphaProfit Premium Service investment newsletter subscribers.

AlphaProfit Premium Service Investment Newsletter

Compounding at an annual rate of 20.1%, a dollar invested in AlphaProfit's selection process in 1994 is now worth $50.27 while a comparable investment in the S&P 500 is worth just $6.84.

Consistent selection of winning mutual fund picks has enabled AlphaProfit's Premium Service to rank #1 in Hulbert Financial's investment newsletter rankings multiple times.

All AlphaProfit Fidelity and ETF model portfolios outperformed the S&P 500 in May gaining between 2.4% and 3.7%.

AlphaProfit's Free Investment Newsletter MoneyMatters

Get two special reports Five Smart Ways of Using Fidelity Select Funds and Avoid Three Common Mistakes ETF Investors Make when you sign up for AlphaProfit's FREE investment newsletter MoneyMatters.

Related Articles:

ETF Model Portfolios Performance
Fidelity Mutual Funds Model Portfolios Performance
Sector ETFs: Invest in the Best Sector ETF Consistently
Fidelity Select Funds: Choose the Best Fidelity Sector Fund Consistently
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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. AlphaProfit MoneyMatters is edited by Dr. Sam Subramanian acclaimed for his financial acumen and analytical skills.

AlphaProfit Investments, LLC is an independent investment research firm based in Sugar Land, TX. AlphaProfit publishes the AlphaProfit Sector Investor's Newsletter, edited by Dr. Sam Subramanian. Leveraging sector funds, the Newsletter provides high-performance model portfolios with Fidelity funds and exchange-traded funds. It also includes actionable stock recommendations. This newsletter features among MarketWatch's top 10 investment newsletters and has won the coveted #1 rank from Hulbert Financial several times.

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