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
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