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Strategies & Market Trends : Fidelity Select Sector funds -- Ignore unavailable to you. Want to Upgrade?

To: BJFW MD who wrote (698)	2/16/1998 5:37:00 AM
From: Bernie Kaplan	Respond to of 4916

The Air Transportation fund put on a tremendous show last week, and its chart is now heading upward very sharply. My latest Buy Signal for this sector was on December 31st, which has provided a 13.5% return to date and makes the fund the 2nd best Select for the year behind Computers. When contemplating an investment in Air Transportation, there are a number of facts and considerations that are important to all sector fund investors. First, since fuel costs play a major part in the operation of any transportation business, these two market sectors traditionally move in opposite directions. The Dow Jones Transportation Average broke through to an all time high eight days ago, and, with few interruptions, it has continued to outperform virtually every other sector of the market. Where the Air Transportation and Transportation fund are concerned, a number of highly beneficial factors have contributed to their recent success, and have made them extremely attractive investment choices at this time. To start with, while a decline in the price of oil was anticipated after the OPEC ministers raised their production quotas, its recent slide has been considerably greater than had been anticipated. In addition, with the Asia economies having consumed close to 25% of the world's oil production last year, plunging currencies and slowing demand in the Pacific has also played a major part in the decline in the price of crude. Despite the continued threat of military action against Iraq and the potential for an interruption of supplies, the oil market has basically shrugged off the consequences of any situation that may arise. Where the airlines are concerned, passenger loads and revenues are strong, amicable contract agreements have been reached with the unions, and the industry's P/E ratios remain considerably lower than those of the broader market. Truckers and railroads have also benefited from the strength of the domestic economy. Even if there is a flood of cheap imported goods in the months to come, they will obviously be the ones who will be called upon to transport these items to their distribution points. Lastly, as a result of many of these factors, there is now a tremendous glut of oil on the market, which has driven down the price of gasoline across the nation. These factors, as we have seen, are having a dramatically negative effect where all the energy related funds are concerned. Despite the excellent long term prospects for the Energy Services fund, for example, the current economic conditions have made it impossible for it to break out of its lengthy downtrend. Even though this sector has provided us with excellent gains over the past few years, and many investors are chomping at the bit to get back in, it is an extremely unattractive option at this time given the fundamentals of the marketplace. All in all, the market activity during the past month has created an extremely favorable and profitable situation where Select Fund investors are concerned. It has presented us with many viable investment options across a broad range of industries and categories. By this time, many of you probably have a position in the Air Transportation fund, and are probably holding one of the high tech and financial sectors. A number of subscribers I have spoken to lately are currently invested in as many as eight or ten of the funds that are in Buy territory, and each of their positions is showing solid gains at this time. When it comes to making new or additional investments at this time, we need to keep in mind that the recent market surge has vaulted most of the Selects into technically overbought territory. Obviously, it is much riskier to jump into any sector after it has been in Buy territory for two or three weeks than when its original Buy signal was issued. Because of this, while many of the Selects are currently rated as Ok to Buy, I recommend that you only make small additions to your current holdings, or nominal new investments, but from both a fundamental and technical standpoint, Air Transportation looks solid although profit taking along the way must be anticipated due to the speed of its recent ascent. Regards to all you frequent flyers. Bernie Kaplan www.sectorfunds.com