In a previous blog post we wrote about the strong performance of the consumer discretionary (cyclicals) sector:
Chart 1. The Fidelity Select Consumer Discretionary Fund (FSCPX) performs strongly in 2017
On the other hand, it seems to be important this year to select the right sub-sector within the large cyclicals group. For example, as we observed earlier, media stocks turned negative, while the leisure sub-sector has turned red-hot.
A third investment choice to consider is the retail sub-sector, which is often overlooked due to recent weak earnings and store closures by brick-and-mortar retailers, such as Macy’s.
We argue here that while online retailers, such as Amazon, have gained market share, consumer spending overall continued to be strong. That’s why we like the Fidelity Select Retailing Fund (FSRPX):
Chart2. The Fidelity Select Retailing Fund (FSRPX) performs strongly in 2017, in part due to investing in both online and brick-and-mortar retailers.
Looking at the long-term picture makes it even more compelling to invest in the retail sub-sector:
Chart 3. The five-year chart of the Fidelity Select Retailing Fund (FSRPX) shows that a long-term bet on increasing consumer spending has worked very well.