Stock Market Correction Leads to Sell-Off for Real Estate Stocks

Fidelity Real Estate Investment Fund (FRESX, last change: -1.94%)

The Fidelity Real Estate Investment Fund (FRESX, last change: -1.94%) is the weakest performer in our survey of Fidelity mutual funds. FRESX lost 14.1% in the last three months. While a snap-back rally can occur at this oversold level, investors are best served by continuing to avoid this sector.

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

Top 10 Fidelity Sector Funds For The Summer Rally

Fed chairman Bernanke’s comment last week stating that the Fed’s policy will be highly accommodative for the foreseeable future led to an across-the-board rally for the U.S. stock market. The market looks decidedly bullish, with many sectors breaking out to new highs.

On the other hand, we are in the middle of the earnings season, which is often associated with increased volatility. Given the current market environment, what are the best investment choices for Fidelity investors?

To answer this question, first lets look at the data. The table below shows the ranked list of the top 10 Fidelity mutual funds based on three-month return, a measure of price momentum.

Top 10 Fidelity Mutual  Funds

Top 10 Fidelity Mutual Funds

Source: FidelitySignal.com

Surprisingly, all of the Fidelity funds on the top 10 list are sector funds. This is highly unusual. Even a few months ago, we would have seen international funds (e.g. Japanese funds) or other investment choices on this list. Even beaten down sector funds, such as the Fidelity Real Estate Investment Fund (FRESX), are now turning bullish. Consequently, the data tells us that smart money is on U.S. sector investments right now.

The second observation is that the list of top Fidelity funds is highly diversified. In addition, all of the ten funds have returned more than 10% in the last three months, in spite of the recent market correction.

The current leaders are the Fidelity Select Automotive (FSAVX), the Fidelity Select Biotechnology (FBIOX) and the Fidelity Select Banking (FSRBX) funds. In addition, it is important to note that four out of the ten funds are related to the finance sector.

Companies investing in the consumer sector are also bullish. The best fund to play this trend is the Fidelity Select Retailing (FSRPX) fund.

For investors who are looking for emerging trends in technology, the Fidelity Select Software and Computers (FSCSX), the Fidelity Select IT Services (FBSOX) and the Fidelity Select Electronics (FSELX) funds offer new opportunities.

Buy/sell signals for Fidelity funds are available at FidelitySignal.com 

Stomach-churning market volatility continues today

The Federal Reserve announced “Operation Twist” today, a plan to lower interest rates by buying long-term treasury bonds. The stock market reacted to the news in the afternoon with across the board selling. The clear winner of the day was the Fidelity Spartan Long-Term Treasury Bond fund.

Fidelity Spartan Long-term Treasury Bond (FLBIX, change: 2.56%)

Fidelity Spartan Long-term Treasury Bond fund (FLBIX, change: 2.56%)

No stock market sector was immune to the news with several sectors loosing more than 5% in a single day! The funds with the largest losses were the energy services, the automotive and the real estate sectors funds. The market conditions continue to be extremely dangerous for equity investors.

Fidelity Select Energy Service (FSESX, change: -5.57%)

Fidelity Select Energy Services fund (FSESX, change: -5.57%)

Fidelity Select Automotive (FSAVX, change: -5.22%)

Fidelity Select Automotive fund (FSAVX, change: -5.22%)

Fidelity Real Estate Investment fund (FRESX, change: -5.17%)

Fidelity Real Estate Investment fund (FRESX, change: -5.17%)

Mutual fund screens are provided by FidelitySignal.com