Fidelity’s top 10 actively managed sector funds delivered respectable gains in the first quarter of 2015.
But did you know that owning Fidelity’s top 10 actively managed sector funds from the first quarter of one year through the second quarter of that year has delivered nearly three times the gain achieved by holding onto or buying an S&P 500 index fund over that same time period?
To be sure, this doesn’t happen every year: Some years this approach would have you losing ground to the benchmark index — though not as much as you’d think. And, to be certain, 2009’s second quarter was a bell ringer as markets rocketed off the bear market nadir of March 9, 2009. Also, to be clear, this is a very small sample set of years — the appearance of a trend could be just that.
Still, if you look at the table below, you’ll see that the results have been very positive.
In sum, in six out of 10 years, the average performance of holding the first quarter’s top 10 sector funds was 9.1% vs. 4.8% for the S&P 500. In the four years where this strategy lost ground to the S&P 500, the performance was -5.9% vs. -3.9% for the S&P 500.
So, from here, investors should look at the top actively managed Fidelity sector funds from the first quarter — and hence ones you should consider owning this quarter. Take a look:
Top 10 Q1 Fidelity Sector Funds
Fidelity Select Automotive Portfolio (MUTF:FSAVX): The current mix is 99.4% stocks and 0.6% cash — call it fully invested. Foreign investments make up 37% of the holdings. The fund’s top holdings include Toyota Motor Corp (ADR) (NYSE:TM), Ford Motor Company (NYSE:F) and General Motors Company (NYSE:GM).
Fidelity Select Biotechnology Portfolio (MUTF:FBIOX): Priced to perfection and prone to a price-related swoon, this sector remains one of my absolute long-term buy recommendations. In Q2? Well, as a fundamental investor I’d be nervous about trying to time into this sector at these valuations, but technically speaking, they’re on a momentum role. The top holdings are Biogen Inc (NASDAQ:BIIB), Gilead Sciences, Inc. (NASDAQ:GILD) and Celgene Corporation (NASDAQ:CELG).
Fidelity Select Construction & Housing Portfolio (MUTF:FSHOX): A spring bounce in the housing market can’t be ruled out — but some of the bounce has been taken out of the spring housing market’s step by virtue of oil-related regions (think Houston up to Alberta) hitting a pump slump. Low inventory and high prices could also be a stumbling block. But if those are the cracks in the story’s foundation, we are seeing both builders and buyers exhibiting pent up demand. Foreign investments make up just 1% of the holdings — this is all in our backyard, and our backyard is built on solid growth ground. The top sectors are consumer discretionary (50%), financials (27%) and industrials (15%). The top holdings are Home Depot Inc (NYSE:HD), Lowe’s Companies, Inc. (NYSE:LOW) and UDR, Inc. (NYSE:UDR).
Fidelity Select Defense and Aerospace Portfolio (MUTF:FSDAX): So all is not right with the world — war is only one way to profiteer here. There are a lot of civilian applications nested inside this fund’s arsenal. The top holdings are United Technologies Corporation (NYSE:UTX), Boeing Co (NYSE:BA) and Rockwell Collins, Inc. (NYSE:COL).
Fidelity Select IT Services Portfolio (MUTF:FBSOX): As commerce goes virtual, demand for IT services goes viral. There isn’t a lack of demand, but older line businesses and new entrants alike are finding this to be a tough space to easily succeed — let alone succeed on scale. An informed active manager should help you plug into profits better than a passive sector ETF here. The top holdings are Visa Inc (NYSE:V), MasterCard Inc (NYSE:MA) and Cognizant Technology Solutions Corp (NASDAQ:CTSH).
Fidelity Select Retailing Portfolio (MUTF:FSRPX): After paying down their holiday spending bills in Q1, and saving more than they usually do, consumers are in solid shape to spend a bit more in Q2. This fund’s top holdings are Home Depot, Amazon.com, Inc. (NASDAQ:AMZN) and Priceline Group Inc (NASDAQ:PCLN).
Fidelity Select Health Care Portfolio (MUTF:FSPHX) — Healthcare has been on a tear. And sub-sectors like biotechnology have been blazing higher, but there are other defensive sectors under the healthcare umbrella which may come to the fore in the second quarter if the higher alpha plays get upstaged by a sell-off. A globally diversified sector, this fund’s foreign investments make up 36% of the holdings. The top holdings are Actavis plc (NYSE:ACT), Medtronic plc (NYSE:MDT) and Boston Scientific Corporation (NYSE:BSX).
There are a few other healthcare subsector standouts for the first quarter:
Fidelity Select Medical Delivery Portfolio (MUTF:FSHCX): Top holdings are UnitedHealth Group Inc. (NYSE:UNH), Express Scripts Holding Company (NASDAQ:ESRX) and McKesson Corporation (NYSE:MCK).