Best Fidelity Fund of 2014: Fidelity Real Estate Fund (FRESX)

Oversold stock markets rallied around the world today due to multiple factors, including declining interest rates and reduced geopolitical threats. I’d continue to be very cautious with committing new funds to equity investments until we can see if the rally can sustain itself. With that said, it is worth noting the emerging new trends in the healthcare, retail and the real estate sectors.

As an example, the chart shows that the Fidelity Real Estate Investment Portfolio Fund (FRESX) is turning increasingly bullish. The blue arrow on the chart shows the buy signal that was issued for FRESX by FidelitySignal.com on February 11. FRESX is now the top-performing Fidelity fund of the year based on total return.

fresx

View investment strategies and buy/sell signals at FidelitySignal.com

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Sector Rotation: the Banking and the Telecommunications Sectors are the Top Performers Today; Real Estate and Gold Stocks are in Correction

Markets rallied today due to positive economic data following the sell off yesterday that was triggered by Chairwoman Yellen signaling the possible end of the Federal Reserve’s Quantitative Easing program this year, which may be followed by interest rate increases next year.

The Fidelity Select Banking Fund (FSRBX) was the top performer today. The FSRBX chart shows the continuation of the multi-year bull market.

fsrbx

The Fidelity Select Telecommunications Fund (FSTCX) was the second best performer. The improving economy and innovative new cellphone and service technologies can become catalysts for this sector, which has underperformed the market since last October:

fstcx

The Fidelity Real Estate Fund (FRESX) did not participate in the rally in a meaningful way today. The chart shows that after making impressive gains in 2014, FRESX is in a correction mode now. We continue to like real estate investments, since the improving economy should continue to be positive for both commercial and residential companies in this space.

fresx

While 80% of Fidelity’s Select sector funds gained today, the Fidelity Select Gold Fund (FSAGX) was one of the weakest Fidelity funds. Similarly to real estate, gold stocks had a strong run up in the last few months and now in correction mode. However, unlike real estate, we regard gold and related investment as purely speculative. On the plus side, FSAGX can be used to increase diversification and to hedge against geopolitical events.

fsagx

Source: FidelitySignal.com

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Real Estate Continues to Outperform the Market in 2014

In previous articles we highlighted the real estate sector as one of the most exciting investment areas for 2014. A large increase of home sales sent homebuilding stocks higher yesterday. As the result, the Fidelity Select Construction and Housing Fund (FSHOX) gained 1.87% and was the best performing Fidelity fund of the day. The blue line on the chart shows that the relative strength of FSHOX (the ratio of the price of the fund versus the S&P 500 index) continues to improve:

fshox

We also made a bullish call for the Fidelity Real Estate Income Fund (FRIFX) on the first trading day of January (see article) and the chart shows that FRIFX has indeed performed well so far this year. FRIFX is an excellent income fund that provides a respectable 4.72% yield (source: Morningstar) and the potential for price appreciation:

frifx

The Fidelity Real Estate Fund (FRESX) holds large cap stocks in the space. The chart pattern shows a bullish breakout that started in January:

fresx

The improving U.S. economy can continue to lift the real estate sector higher this year, but investments in this sector can also be highly volatile. That is why diversification across of different types of real estate investments is key (see the real estate model portfolio at FidelitySignal):

realestate

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