FIDELITY SELECT FUND REVIEW
Echoing the problems faced by the broader market averages, the past four days were exceptionally difficult ones for the Select Fund family. Compared to the major market averages, however, it was a bit surprising that 23 of the 39 funds in the family managed to outperform the S & P 500 over the past four days. All that this means, of course, is that their declines are coming at a slower pace than those of the major averages. Smaller than average losses may look good on a relative basis, but on an absolute scale they do nothing at all for the investor who is trying desperately to find any sector that will produce even the slightest of profits.
For the entire week only two funds, Utilities Growth (+ .46%) and Retailing (+ .13%), managed to finish in positive territory, and the average Select Fund slid by almost 1.9 percent. Food & Agriculture followed with a decline of .29%, while Consumer Industries and the Business Services & Outsourcing fund each lost .35% over the four days.
On the downside, the Precious Metals fund plunged by 7.28%, while American Gold was hit for a 6.67% loss. Other soundly trounced sectors included Paper & Forest (- 5.80%), Industrial Materials (- 3.31%), Electronics (- 3.20%), and the Computers fund (- 3.14%).
Not only was last week an especially difficult one, but the month of May was quite a disappointment for the entire Select Fund family. Only three funds, Food & Agriculture (+ 2.3%), Retailing (+ 1.7%), and Consumer Industries (+ .5%) ended the month in positive territory. These relatively successful performers were followed by the Health Care and Automotive funds at -.6%, Insurance and Utilities Growth at -1.2%, and the new Medical Equipment fund with a loss of 1.5%.
The average Select Fund lost a stunning 4.2% for the month, and only 10 funds managed to beat the 1.9% decline that was posted by the S & P 500. Just as discouragingly, only 6 Selects are currently generating MR figures that are equal to or greater than that of the S & P 500.
With Asian demand for gold decreasing on almost a daily basis, it was not surprising that Precious Metals (- 15.3%) and American Gold (- 14.1%) were the month's worst performers. Continued concern over the economies in the Pacific turned May into a terrible month for the high tech sectors. The Electronics fund lost 13.4%, and with a massive gain of .1% for the entire year has rapidly turned into the black sheep within the group. It was followed by Software at - 7.8%, Technology at - 7.5%, and the Computers fund at - 6.8%.
Despite the support of a relatively stable bond market, May was an unproductive month for the interest sensitive sectors. After the Insurance fund at - 1.2%, the next best performer was Construction & Housing at - 1.7%. Financial Services lost 1.9%, and the Brokerage fund was hit for a 2.3% loss. Regional Banks fell by 2.7%, while the historically top rated Home Finance fund dropped by 3.5%.
The energy related sectors also had a very rough time of it during May. The loss posted by the Energy fund (- 2.4%), compared quite favorably to the 2.9% decline in the XOI Oil Index, but the Natural Gas fund slid by 5.5%. This was also the case with the heavily promoted Energy Services fund, whose 6.4% decline in May looked quite good compared to the 10.4% loss posted by the OSX Oil Services Index.
At this time, the top rated Select Funds are Retailing, Food & Agriculture, Health Care, and Consumer Industries. Obviously, this clearly illustrates the extremely defensive nature of the market at this time, but their relative success merely points out that they are holding their own better than many other funds.
Since their last peaks back on April 3rd, for example, the Retailing fund has declined by .7%, Food & Agriculture has lost 2.2%, Health Care has slid by 1.7%, and Consumer Industries has pulled back by 1.8%. Even though these losses are extremely small when compared to many funds in the family, they are certainly not the type of returns that lead to a worry free retirement.
Looking ahead, a prolonged revival of the troubles in Asia, which have now resulted in a recession in Hong Kong of all places, may keep investors focused on those sectors of the economy that have absolutely no exposure to the region. This might bode well for traditionally sedate funds such as Utilities, Telecommunications and Automotive, as well as the financials if interest rates continue to decline. Nevertheless, if the relative strength of these sectors produces only the slightest of gains or losses that are less than those of the broader market averages, cash may remain the most attractive investment for a considerable amount of time.
Currently, the charts of the Retailing fund appear to give it the best chance of breaking out to the upside in the days ahead. The other top rated funds should continue to be held if you currently own them, while last week's turmoil in the Health Care sector certainly requires close monitoring for a possible Sell signal. At this time, the charts of Air Transportation, Defense, Energy Services, and a few other sectors are starting to look a bit intriguing. However, in the cases of these funds as well as the remainder of the family, it will take much more than a one or two day bounce before any reliable Buy signals can be generated.
In last weekend's issue, I issued Sell signals for seventeen members of the Select Fund family. In Wednesday morning's hotline, I advised the sale of a number of other funds, and on Thursday morning, I issued Sell signals for all the Selects except for Food & Agriculture, Consumer Industries, Health Care, and Retailing.
Bernie Kaplan
The Sector Fund Strategist
www.sectorfunds.com |
