Is Fidelity Select Pharmaceuticals (FPHAX) A Strong Mutual Fund Pick Right Now?

Having trouble finding a Sector - Health fund? Well, Fidelity Select Pharmaceuticals FPHAX would not be a good potential starting point right now. FPHAX possesses a Zacks Mutual Fund Rank of 5 (Strong Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

The world of Sector - Health funds is an area filled with options, such as FPHAX. Healthcare is one of the biggest sectors of the American economy, and Sector - Health mutual funds provide a great opportunity to invest in this industry. Here, funds can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FPHAX. The Fidelity Select Pharmaceuticals made its debut in June of 2001 and FPHAX has managed to accumulate roughly $784.12 million in assets, as of the most recently available information. The fund's current manager, Asher Anolic, has been in charge of the fund since April of 2013.

Performance

Investors naturally seek funds with strong performance. This fund in particular has delivered a 5-year annualized total return of 11.91%, and is in the bottom third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 0.09%, which places it in the bottom 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 FPHAX over the past three years is 13.71% compared to the category average of 17.1%. Looking at the past 5 years, the fund's standard deviation is 13.15% compared to the category average of 16.74%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors cannot discount the risks to this segment though, as it is always important to remember the downside for any potential investment. In the most recent bear market, FPHAX lost 34.71% and underperformed comparable funds by 1.79%. This means that the fund could possibly be a worse choice than its peers during a down market environment.

Investors should note that the fund has a 5-year beta of 0.91, so it is likely going to be less volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. With a negative alpha of -1.62, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FPHAX is a no load fund. It has an expense ratio of 0.81% compared to the category average of 1.31%. From a cost perspective, FPHAX is actually cheaper than its peers.

While the minimum initial investment for the product is $2,500, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

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

Don't stop here for your research on Sector - Health 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 FPHAX 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.