Is Fidelity Select Portfolio Medical Technology and Devices (FSMEX) a strong choice for a mutual fund right now?

Are you having trouble finding a health sector fund? A potential entry point is Fidelity Select Portfolio Medical Technology and Devices (FSMEX). FSMEX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on various predictive factors such as size, cost and past performance.

Objective

Zacks rates FSMEX as a sector – Health, a segment full of options. Sector – Health mutual funds offer investors a focus on the health care industry, one of the largest sectors of the U.S. economy. These funds can include everything from pharmaceutical companies to medical device manufacturers and for-profit hospitals.

History of the fund/manager

FSMEX is part of the Fidelity family of funds, a company headquartered in Boston, Massachusetts. The Fidelity Select medical technology and device portfolio debuted in April 1998, and FSMEX has accumulated assets of approximately $5.39 billion, the most recent information available. The fund is currently managed by Edward Yoon, who has been in charge since May 2007.

Efficiency

Investors naturally look for funds with good performance. FSMEX has a 5-year annualized total return of 8.48% and is in the bottom third of its category competitors. However, if you’re looking for a shorter time frame, it’s also worth looking at the 3-year annualized total return of -3.21%, which puts it in the bottom third of that time frame.

Please note that product returns may not reflect all product expenses. Any fees that are not reflected will reduce profits. Total returns do not reflect (%) the fund’s sales charge. If sales costs were included, the total rate of return would be lower.

When analyzing a fund’s performance, you should also pay attention to the standard deviation of returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 17.21%, the standard deviation of FSMEX over the last three years is 21.62%. Over the past 5 years, the fund’s standard deviation is 20.6% compared to the category average of 17.81%. This makes the fund more volatile than other funds from the last six months.

Risk factors

Investors shouldn’t forget about beta, an important way to measure a mutual fund’s risk compared to the market as a whole. FSMEX has a 5-year beta of 0.92, which means it is likely to be less volatile than the market average. Since alpha represents the risk-adjusted performance of a portfolio relative to a benchmark, which in this case is the S&P 500, you should also pay attention to this metric. With a negative alpha value of -4.86, managers of this portfolio have difficulty selecting securities that generate returns that outperform the benchmark.

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Expenses

As competition in the mutual fund market increases, costs become increasingly important. Compared to its otherwise identical counterpart, a cheap product will be superior, all other factors being equal. Therefore, a closer look at cost-related metrics is important for investors. In terms of fees, FSMEX is a no-load fund. The expense ratio is 0.70% compared to the category average of 1.13%. From a cost perspective, FSMEX is actually cheaper than its counterparts.

Investors should also note that the minimum initial investment in the product is $0 and that any subsequent investment has no minimum amount.

Fees charged by investment advisors are not included. The returns would be lower if they were included.

Bottom line

Overall, even with its relatively weak performance, medium risk of loss, and lower fees, Fidelity Select Portfolio Medical Technology and Devices (FSMEX) has a high Zacks Mutual Fund Rank and therefore appears to be an excellent potential pick for investors right now.

Your research on the Sector – Health segment does not have to end there. You can check out all the great mutual fund tools we have to offer by visiting www.zacks.com/funds/mutual-funds to see the additional features we offer as well as obtain additional information. Zacks provides a full suite of tools to help you analyze your portfolio – both funds and stocks – in the most efficient way possible.

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