Each year, best Fidelity Select funds on average beat the S&P 500 by 42%, that is 4,200 basis points. Fidelity Select Semiconductors leads the performance table in 2021 with a year-to-date return of 58%. Fidelity 500 Index Fund is up 28% in comparison. Which funds will stake their claim as the best Fidelity Select Funds in 2022?
U. S. stocks have managed to scale a wall of worry in 2021.
Investors have maintained a healthy appetite for stocks despite new virus strains, rising inflation, and potentially higher interest rates.
The Federal Reserve’s unwavering support of the economy through near-zero interest rates and $120 billion in monthly bond purchases has encouraged risk-taking.
As of December 24, Fidelity 500 Index Fund (FXAIX) that tracks the S&P 500 index ($SPX) is up 28% for the year.
Yet, the year has been a challenging one for many investment strategies.
The reason is a handful of index heavyweights drove the S&P 500 higher while the average stock did not fare as well.
The S&P 500’s largest constituent Apple is up 30% this year. Microsoft, Alphabet, and Tesla are each up over 40%. Nvidia is up 125%. Collectively, these five stocks account for more than 20% of the S&P 500’s market capitalization.
As the year ends, large-caps are ahead of mid-caps and small-caps by 7% and 13%, respectively.
While the growth style worked better than value among large-caps, the tables turned in the mid-cap and small-cap spaces.
Small-cap growth stocks have lagged the S&P 500 the most, gaining just 3%.
Best Fidelity Select Funds of 2021
Forty-five of the 48 Fidelity sector and thematic funds in operation are in the black for the year. Thirteen of them are outperforming the S&P 500.
The five top performers among the group of Fidelity sector and thematic funds include those focusing on semiconductors, energy, housing, capital markets, and real estate.
Fidelity Select Semiconductors (FSELX) leads the performance table with a year-to-date return of 58%. The shortage of semiconductor chips that started in early 2020 has continued through 2021, boosting share prices in this industry.
The 2020 laggards Fidelity Select Energy (FSENX) and Fidelity Real Estate Investment (FRESX) take the second and fifth spots on the performance table. They are up 54% and 37%, respectively.
Fidelity Select Construction and Housing (FSHOX) and Fidelity Select Brokerage and Investment Management (FSLBX) have continued their winning ways from 2020, adding 53% and 41%, respectively. They take the third and fourth spots in the performance table.
Fidelity Select Gold (FSAGX), Fidelity Select Biotechnology (FBIOX), and Fidelity Select Telecommunications (FSTCX) are at the bottom of the return table with losses of 12%, 10%, and 1%, respectively.
Fidelity Select Funds: The Market Milieu in 2022
Stocks have come around full-circle since the pandemic hit in early 2020.
On December 23, the S&P 500 closed at an all-time high.
Fears of inflation have replaced fears of a pandemic-led recession.
Earlier this month, the Federal Reserve outlined plans to scale down the monetary stimulus it implemented in response to the pandemic.
The central bank plans to cut its bond purchases by $30 billion a month to end this program in March 2022.
Federal Reserve officials also predicted three 0.25% increases in short-term interest rates in 2022.
In addition to rising inflation and higher interest rates, investors are concerned about the impact of the recently discovered omicron virus variant and supply chain disruptions in 2022.
While the above factors can compel some investors to sell stocks, all of 2022 does not have to be doom-and-gloom.
The key here is inflation. Most of the inflationary pressures in the economy result from supply chain disruptions and labor shortages.
Inflation pressures should subside as supply chains normalize and labor availability improves.
The threat of the Fed raising interest rates should recede as inflationary pressures dissipate, encouraging investors to buy stocks.
Best Sectors for 2022
AlphaProfit uses its multi-dimensional sector evaluation and selection process to select industries and sectors with higher return potential. These selections help subscribers to protect and grow their assets with low volatility.
AlphaProfit’s sector evaluation & selection process currently favors investments in the health care and industrial sectors for 2022.
Health care: The healthcare sector lagged the broad market in 2021 as consumer discretionary and information technology sectors benefited more from the economic reopening. Less distress from COVID in 2022 should be beneficial to health care companies as elective care increases and expenses related to COVID care subside. The narrow majorities in both houses of Congress limit the risk of disruptive health care reform.
The health care sector in the U. S. is shifting to a fee-for-value payment system from a fee-for-service approach. This shift encourages new lower-cost care delivery business models and supports their growth. The success of lower-cost care models and innovation in biopharmaceuticals, drug development, and medical testing should translate into higher share prices.
Industrials: Disruptions to the supply chain and rising costs of inputs from COVID impacted many industrial manufacturers in 2021. Aerospace companies endured the worst of the fall in air travel. Any relief from COVID should be a welcome change for this sector.
There are encouraging signs for 2022 to be a better year for industrial manufacturers. Orders for durable goods have exceeded their 2020 high and gained momentum. The Institute of Supply Management’s semiannual economic forecast, released in December, predicts 2022 manufacturing revenues to grow 6.5%.
Industrial companies are already benefiting from the demand for infrastructure required to automate factories & warehouses and reduce reliance on fossil fuels. Sustained growth in e-commerce is driving demand for freight transport. The drive to reduce emissions and improve air quality translates into higher demand for building products.
Best Fidelity Select Funds for 2022
To profit from the above trends, investors can invest in Fidelity Select Health Care (FSPHX) and Fidelity Select Industrials (FCYIX) with the latitude to own stocks across the entire health care and industrial sectors, respectively.
However, investors can target specific industries in the health care and industrial sectors to earn higher returns with lower volatility.
On December 31, AlphaProfit will reconstitute its Fidelity Core and Fidelity Focus model portfolios with a mix of Fidelity Select funds to help Premium Service subscribers protect and grow their assets.
To get timely recommendations of best Fidelity funds in AlphaProfit’s Fidelity Core and Fidelity Focus model portfolios, subscribe to AlphaProfit Premium Service now.