Sector Rotation: Automotive Stocks are Advancing Again

Last year was a tough year for car companies, but 2017 may become a turnaround year for the sector. We think that a combination of factors, such as new product cycles and the availability of relatively low-cost financing, will make this sector increasingly attractive again for investors.

Our investment of choice in this space is the Fidelity Select Automotive Fund (FSAVX), which provides diversification in the sector:

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Not surprisingly, the growth comes from innovators in the sector, such as Tesla:

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While traditional car companies are still struggling to increase financial performance:

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Another growth driver is the increased interest in used cars, which is fueled by the large supply of low milage cars coming off of short-term leases. Used-car dealers, such as Carmax, are benefiting from this trend:

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We identified the change of the long-term trend in the automotive sector using the momentum screen provided by Fidelity Sector Report. Click here to see more advancing sectors.

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