If investors are looking at the Sector - Tech fund category, Fidelity Select Software & Company Services (FSCSX) could be a potential option. FSCSX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
FSCSX is part of the Sector - Tech category, which boasts an array of different possible selections. With a much more diversified approach, Sector - Tech mutual funds give investors a way to own a stake in a notoriously risky sector. Tech companies are in various industries like semiconductors, software, internet, and networking, among others.
History of Fund/Manager
Fidelity is based in Boston, MA, and is the manager of FSCSX. The Fidelity Select Software & Company Services made its debut in July of 1985 and FSCSX has managed to accumulate roughly $7.90 billion in assets, as of the most recently available information. The fund is currently managed by Ali Khan who has been in charge of the fund since July of 2014.
Performance
Investors naturally seek funds with strong performance. This fund carries a 5-year annualized total return of 19.54%, and it sits in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 26.06%, which places it in the top 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. Over the past three years, FSCSX's standard deviation comes in at 13.9%, compared to the category average of 17.16%. Over the past 5 years, the standard deviation of the fund is 14.99% compared to the category average of 17.08%. This makes the fund less 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 FSCSX's case, the fund lost 47.69% in the most recent bear market and outperformed its peer group by 6%. This makes the fund a possibly better choice than its peers during a sliding market environment.
Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. FSCSX has a 5-year beta of 1.09, which means it is likely to be more volatile than the market average. 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. FSCSX's 5-year performance has produced a positive alpha of 6.5, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Holdings
Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is largely on equities that are traded in the United States.
This fund is currently holding about 76.97% stock in stocks, which have an average market capitalization of $414.94 billion. Turnover is 26%, which means this fund makes fewer trades than comparable funds.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FSCSX is a no load fund. It has an expense ratio of 0.71% compared to the category average of 1.39%. FSCSX is actually cheaper than its peers when you consider factors like cost.
Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.
Bottom Line
Overall, Fidelity Select Software & Company Services ( FSCSX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Fidelity Select Software & Company Services ( FSCSX ) looks like a good potential choice for investors right now.
For additional information on the Sector - Tech area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into FSCSX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.
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