Is Fidelity Select Energy Service (FSESX) A Strong Mutual Fund Pick Right Now?

Having trouble finding a Sector - Energy fund? Well, Fidelity Select Energy Service FSESX would not be a good potential starting point right now. FSESX carries a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FSESX is one of many Sector - Energy funds to choose from. Sector - Energy mutual funds are comprised of various changing and hugely important industries throughout the massive global energy sector. Even though clean energy is beginning to pick up steam, oil and gas companies have the highest exposure, but carbon-based fuels will be the biggest group of assets in these funds.

History of Fund/Manager

FSESX is a part of the Fidelity family of funds, a company based out of Boston, MA. Fidelity Select Energy Service made its debut in December of 1985, and since then, FSESX has accumulated about $437.16 million in assets, per the most up-to-date date available. Ben Shuleva is the fund's current manager and has held that role since August of 2013.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of -3.23%, and is in the bottom third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of -4.26%, which places it in the middle third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. The standard deviation of FSESX over the past three years is 26.56% compared to the category average of 21.55%. Looking at the past 5 years, the fund's standard deviation is 24.29% compared to the category average of 19.03%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. In FSESX's case, the fund lost 64.5% in the most recent bear market and underperformed comparable funds by 9.18%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.12, which means it is hypothetically more volatile than the market at large. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. With a negative alpha of -15.98, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FSESX is a no load fund. It has an expense ratio of 0.81% compared to the category average of 1.44%. From a cost perspective, FSESX is actually cheaper than its peers.

This fund requires a minimum initial investment of $2,500, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Select Energy Service has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and lower fees, Fidelity Select Energy Service looks like a somewhat weak choice for investors right now.

Don't stop here for your research on Sector - Energy funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare FSESX to its peers as well for 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.