FSESX: hold or sell?
For the last couple of years, I've been switching back and forth between Fidelity's Health Care, Electronics, and Energy Services sector funds. Whenever one industry looks overvalued, or like it might stumble, I switch to whatever looks undervalued. Most of the time, it's been in the Electronics fund, because it has the best long-term record, and that industry has the best long-term profit growth potential. On 1-5-99, I switched my (and my wife's) tax-defered accounts out of FSELX (electronics sector fund), into FSESX.
In at 14.89. Today's close was 19.97, so I'm up 30%, in 3 months. Time to take my profits and run, or stay put till oil hits 18$/B ?
I can buy the electronics fund for about what I sold it for in January. I notice that FSESX peaked, at about 20, in 3-99, 11-98, and also January through June of 1997. There seems to be a strong resistance line there. On the other hand, the sector has only just begun to go back into favor, and is still far below its 1998 highs. In this momentum-driven market, sectors that rotate into favor seem to get pushed to absurdly overvalued ranges. Look at what's happened in the last few weeks with the internet brokerages. There is much less air underneath oil service stocks, even after today, than almost anywhere else you look. Certainly, most drug and semiconductor stocks are overvalued, at least all the quality names.
The upturn in the fundamentals of this sector is still a long, long way off. 2000, probably. Lots of things can happen in the meantime: wars (real ones, I don't mean Kosovo), recessions, rising interest rates.
If I hold, I'll certainly sell everything the day oil hits 18$. At that price, OPEC discipline will break down, and the supply will increase. I thought 10$ oil was an unsustainable anomoly, but so is 25$ oil (certainly), and 20$ oil (probably).
In Kotzebue, the town electric co-op has put in a windmill farm over the last couple of years. I thought it was crazy. I thought they'd never be able to keep the things operating. Winter storms often reach 40-50 mph winds, and temperatures are often 30 below, here. But they do work, and more windmills are going to be gradually added, till there are enough to meet peak demand. It's worthwhile to do this, because fuel oil has to be barged up through the Bering Strait in the summer. Not many communities will find windmills worthwhile, at current prices. But, if oil ever gets to 25$, there will be a lot of "alternative" technologies that have been quietly percolating, and will then make sense, economically. |
