fido sel managers and best funds. have fun !
cbs.marketwatch.com
LOS ANGELES (CBS.MW) -- The Olympics. The
World Series. The Indy 500. The Super Bowl. Like
the competitors in those storied spectacles,
Fidelity fields a veritable "dream team" of sector
funds. And like Michael Jordan, these guys need
no introduction. Fidelity's Select Funds are in a
class by themselves: 11 of Fidelity's 38 sector
funds made it onto our top 20 roster of Sector
Fund SuperStars.
OK, so sector funds are more volatile. They
certainly are more cyclical -- rising and falling,
in and out of favor -- so they could be replaced
by some new favorite industrial sectors in a few
years. And maybe they are less diversified,
tending to underperform benchmarks like the
Standard & Poor's 500 in a correction, like now.
But still, for the sophisticated investor, serious
market timers, the high long-term payoff is well
worth the risk. For example, even though the
market has been rough lately, these funds have
average annual returns of about 20 percent or
more in the past decade: Brokerage, Financial
Services, Home Finance, Regional Banks,
Electronics and Healthcare. They're volatile in the
short term, while still being long-term high
performers. So if you're a savvy investor --
especially if you're someone who has a working
familiarity with each industry -- these funds
might even replace some of your growth funds.
Yes, sector funds do tend to be more
volatile. After all, they are by nature
nondiversified, focusing narrowly on very
specific industrial categories. Volatile, cyclical,
less diversified, less predictable, sector funds are
clearly best left as a tool for professional market
timers and sophisticated investors. In recent
years, however, the financial sector has been
acting more like a growth fund, inviting a flood
of new money chasing the obvious opportunities.
And yes, there is a downside to the sector play at
Fidelity: You pay a 3 percent load up front to get
in the game and average expenses of 1.6 percent,
higher than those for most stock funds; turnover
is 150 percent, which may impact your taxes;
average manager tenure is less than two years;
and while the SuperStars listed below are
outperforming the S&P by a wide margin,
Fidelity's sector funds, on the whole, do
underperform the blue-chip benchmark.
Nevertheless, the reality is that about 25 of
Fidelity's 35 sector funds are average or better
within their specific categories. So if you're a
street-smart, risk-tolerant, active investor, jump
in and play the game. If you limit your
investments in sector funds, the rewards can be
quite generous and the game quite exciting.
Four of Fidelity's financial-services sector funds
-- Fidelity Select Brokerage & Investment
Management (FSLBX), Fidelity Select
Financial Services (FIDSX), Fidelity Select
Home Finance (FSVLX) and Fidelity Select
Regional Banks (FSRBX) -- are in the top 10
Sector SuperStars, possibly as a sign of the
broader macroeconomic forces at work.
The extraordinary growth of technology,
especially the World Wide Web, parallels the
unprecedented growth in financial services,
propelled by the collective macroeconomic
forces of the super-bull market, higher
disposable income, online discount brokerage,
the emergence of the new do-it-yourself
investor, low interest and inflation rates, and
increased global interest in equities.
In this context, it's easy to see why the
financial-services sector has been red hot in
recent years. In fact, success in financial services
-- riding the momentum of unprecedented
economic prosperity, fueled by technological
advances -- may be a no-brainer.
In the past five years, average returns have been
beating the S&P 500 by several percentage
points.
Fidelity's 38 Select funds aren't cheap. All have
that 3 percent front-end load, making them the
only load funds among my 100 SuperStars. And
operating expenses, as noted above, are quite
high. The average for these four funds is over 1.5
percent, with the highest being Select Brokerage,
at 1.93 percent. Recent three-year returns are
still hovering around 20 to 25 percent annually,
in spite of year-to-date losses. If you were lucky
to see this sector's explosion coming, $10,000
invested in this fearsome foursome would have
grown to about $80,000 in the past decade.
Here's a rundown of that foursome, followed by
capsules on other members of the Select family:
Fidelity Select Brokerage & Investment
Management (FSLBX) has been around since
1985, with a new manager, Peter Fruzzetti,
taking charge in 1997 after several years as an
analyst. He has about half of his roughly $1
billion in the Wall Street establishment, betting
on the brand names, such as Morgan Stanley,
Merrill Lynch, Bear Sterns, Salomon and Paine
Webber, and riding their coattails quite
successfully. Long-term returns have also been
solid: over 18 percent for the past decade.
Fidelity Select Financial Services (FIDSX) is
also managed by an experienced, new manager.
Robert Owens, took over in 1996 and has been
an analyst with Fidelity since 1990. This fund
opened its doors in 1981 and manages several
hundred million dollars in assets. Over half the
holdings are concentrated in 10 institutions,
including Citicorp, American Express, BancOne,
Barnett and First Chicago NBD. Mergers have
boosted performance. Short-term returns are
incredible. And long-term returns are equally
impressive, averaging over 20 percent for more
than a decade.
Fidelity Select Home Finance (FSVLX) has also
been around since 1985, with manager Bill
Rubin in the driver's seat since 1994. At least 80
percent of the fund's roughly $2 billion in assets
is invested in real estate finance institutions:
solid names like Ahmanson, Dime, Washington
Mutual, Chase and Fannie Mae. With average
returns well over 23 percent for the past decade,
although any downdrafts in interest rates or the
real estate industry will have an impact, this is a
solid fund.
Fidelity Select Regional Banks (FSRBX) is
another strong long-term performer that's been
around since 1986. Average returns have been
23 percent for the past decade. Christine
Schaulat took the helm in early 1998 and
manages well over $1 billion in assets. The term
"regional" is a misnomer as the investment style
has shifted more toward money-center banks,
with holdings in BankAmerica, First Chicago
NBD, Wells Fargo, NationsBank and Citicorp.
Fidelity Select Healthcare (FSPHX) is driven by
yet another economic megatrend. Aging baby
boomers are living longer and need more health
care. Medical costs are going through the roof.
Managed care has transformed the medical field
from caring for people to managing the bottom
line. Fidelity has been on the leading edge of this
wave since starting this fund in 1981, which
now has over $2 billion in assets. The manager,
Beso Sikharulidze, took over the fund in 1997
after a stint as an analyst. So far, he's scoring
high marks with recent one-year returns close to
30 percent. Longer-term returns are equally
impressive: For the past decade, the fund has had
average annual returns of slightly under 25
percent; the figure for the past five years exceeds
30 percent.
The fund's objective is capital appreciation.
Sikharulidze achieves his goal by sticking with
the brand names in drugs, medical supplies,
biotechnology, HMOs and other health-care
delivery systems; holdings include Merck, Pfizer,
Eli Lilly, Bristol Myers Squibb and
Warner-Lambert. At any given time, over half of
the portfolio may be invested in just 10 of these
industry leaders. If the heath-care sector is of
special interest to you, this is an excellent
investment choice.
Fidelity Select Electronics (FSELX): Technology
may be the single most important force driving
our economy and our world into the new
millennium. Fidelity entered this sector with
several funds focusing on computers, software,
telecom and electronics. This sector fund opened
its doors in 1985 and has enjoyed long-term
returns averaging close to 21 percent for the
past 10 years. Returns here may be more a
reflection of underlying macroeconomic trends
than stock-picking magic. A $10,000 investment
here 10 years ago would be worth over $70,000
today, although it been relatively level recently.
Paul Kaplan took over as manager in 1996 and
has been one of the more active managers on the
Fidelity sector team. His electronics portfolio is
quite concentrated, with more than 50 percent of
its assets in 10 stocks in an extremely volatile
sector. And Kaplan's practically a day trader, with
turnover in excess of 300 percent annually,
paralleling the rapid flow of generations of
technology. So don't even bother to ask about
holdings. By the time you get any information
about the portfolio, Kaplan will already have a
new one. But if you're savvy about the electronics
sector of the economy, this may be as good as it
gets.
In fact, correction or not, if you're a market timer,
if you love playing the sectors, if you believe the
market's ready for another bull run, you'd better
take a close look Fidelity's 38 sector funds. Quite
a few of them are not just as good as it gets;
they're better. |
