The Fidelity Magellan Fund (FMAGX) and several other Fidelity sector and international funds experienced large percentage drops of their Net Asset Value (NAV) at the end of the Friday trading session due to the distribution of capital gains. Investors will receive the distributions on the “pay date”, which is Monday, December 8. For more details click here.
Here are a few examples of Fidelity funds with large price drops:
U.S. equities stabilized last Friday after the market sell off in the previous sessions. Increased volatility is not unusual in the fall season, as many of the infamous stock market crashes occurred in October.
The money rotation into large-cap blue chip stocks, which I highlighted in a recent article, has continued as investors are searching for the safety of large, stable companies in an uncertain market environment. As the result, Fidelity funds that invest in this space all show positive relative strength compared to the S&P 500 index. My top picks are the Blue Chip Growth Fund (FBGRX), the Magellan Fund (FMAGX) and the Contra Fund (FCNTX).
Deflating oil and commodity prices in general has caused the stock price of large cap energy companies to decline, as shown on the chart of the Fidelity Energy Fund (FSENX) below. As commodity prices may eventually bottom in 2015, investments in the energy sector can become attractive again.
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The stock market sell off yesterday caused all Fidelity select sector funds to decline. As we approach the often volatile fall season we are not surprised to see investors reducing “risk on” investments. To identify the weakest sectors we use relative strength that measures the performance of a given investment compared to the S&P 500 index.
One of the weakest Fidelity funds based on this measure is the Select Materials Portfolio (FSDPX). The top panel of the FSDPX chart below shows that the relative strength is declining at an accelerated pace (see blue line). This suggests that the net asset value of FSDPX can decline more rapidly than the equity market in case of a continued sell off.
Buy and sell signals for Fidelity funds are available at FidelitySignal.com
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The earnings season often brings volatility for equities, but this summer the bullish trend stayed uninterrupted for the S&P 500 index. The benchmark Fidelity Spartan U.S. Equity Index Fund (FUSEX) has gained an impressive 5.85% return in the last three months:
The Fidelity Select Defense/Aerospace Fund (FSDAX) is the weakest performing Fidelity fund with a -2.63% year-to-date return. The chart below shows that the relative strength of this sector has been declining since the January correction. The chart pattern is negative, as well. We would avoid investing in this sector until FSDAX regains its momentum and moves above the 100-day moving average line.
The salient feature of the bullish uptrend of the U.S. equity market this summer is low volatility. Most sectors are up since the last correction in February. The benchmark Fidelity Spartan 500 Index Fund (FUSEX) has returned 6.56% in the last three months.
As energy prices have slowly increased since January, it is not surprising to see Fidelity funds investing in the natural resources sector dominating the list of the top 10 Fidelity funds (ranking is provided by FidelitySignal):
One of our favorite investments in this sector is the Fidelity Natural Resources Fund (FNARX). FNARX has provided an excellent 35.48% gain since the buy signal was issued on April 22, 2013. The top panel of the chart below shows that the relative strength of FNARX compared to the S&P 500 index has been increasing, which continues to make this mutual fund an attractive investment:
Buy and sell signals for Fidelity funds are available at FidelitySignal.com
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After three years of underperformance, emerging market investments are starting to outperform the U.S. equity market. Renewed interest in emerging markets is driven by multiple factors, such as rich valuations in some U.S. equity sectors, increased appetite for higher returns and pro-market government policies in several emerging market countries. For example, the recent elections in India resulted in a more than 20% rally.
Fidelity has several excellent emerging markets funds. For investors looking for a diversified investment in the space, the Fidelity Emerging Markets Fund (FEMKX) is a popular choice. The long-term chart shows that FEMKX has not provided steady returns for more than three years, but appears to be turning the corner:
For conservative investors the Fidelity New Markets Income Fund (FNMIX) offers an excellent choice to invest in the international bond market. FNMIX currently yields 4.62%.
The FNMIX chart shows that, in addition to the respectable income, significant capital appreciation can be achieved by investing in the FNMIX, as well. FNMIX has appreciated 4.65% since the April 1 buy signal that was issued by FidelitySignal.com. We think that both the fundamental and the technical factors are in place to support further gains.
Buy and sell signals for Fidelity funds are available at FidelitySignal.com
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Investors may have been alarmed by the large price drops of several Fidelity funds at the end of the Friday trading session. The drop in the net asset value (NAV) of these funds was largely due to the distribution of capital gains, which happens periodically. For more details click below:
Here are a few examples of Fidelity funds with large price drops:
Seesaw market action today resulted in the Dow Jones Industrial Average briefly reaching an all-time high level before pulling back at the end of the trading session. Perhaps the most disappointing is the performance of companies in the social media and biotechnology sectors. These sectors led the bull market last year, but they no longer appear to be in in favor with investors.
While market volatility and sector rotation can be confusing on the short run, it is worthwhile to take a look at the long-term picture from time-to-time. The five-year charts below show three excellent Fidelity funds (FNARX, FSNGX and FSENX) that invest in the natural resources sector. This sector includes natural gas, oil and other energy sources, in addition to metals and materials stocks.
The charts show that the natural resources sector resumed its long-term uptrend last July, which coincided with an about 10% increase of crude oil prices. This positive trend is also supported by the American energy renaissance, which includes the development of unconventional and alternative energy resources.
While stocks of natural resources companies can be volatile, this sector continues to be an attractive choice for investors seeking diversification in 2014, because both the fundamental and the technical drivers are in place.
Buy and sell signals are available at FidelitySignal.com
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Equity markets showed signs of stability today after several days of selling that started on January 23. Hard-hit emerging market currencies rebounded. News about the improving economy and an earnings surprise by FaceBook set the tone for the positive market action.
The chart shows that the benchmark Fidelity Spartan U.S. Equity Index Fund (FUSEX) was able to hold its 100-day moving average, which has provided support for more than a year:
The table below shows the highest-ranked Fidelity mutual funds based on their three-month return. The U.S. stock market continues to lead in 2014, since no international fund made it to the top 10 list so far in 2014. The nine out of the ten highest-ranked funds represent subsectors of the health care and the technology industries:
Source: FidelitySignal.com
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In the previous parts of the series we highlighted a handful of excellent Fidelity mutual funds that allow investors to build up core positions representing small cap stocks (see article), value investments (see article) and corporate bonds (see article), assuming that the current economic and market trends continue in 2014.
We also highlighted gold, as a potential contrarian investment (see article). While gold did not hold its recent support level and continues its downtrend, we expect that the gold mining sector will bottom in the first half of 2014 and may become an attractive investment again.
Today, let’s take a look at international investments, which can be used to diversify U.S. equity holdings in your portfolio. International equity markets have underperformed U.S. equities in 2013, but this may change in 2014. Currently Europe is the strongest with Nordic economies leading the way, but even a the weaker economies, such as Spain, Italy, Greece and Poland are expected to do well next year.
The weakest international investments in 2013 have been mutual funds investing in Latin America. The boom-bust market cycles are not unusual in that part of the world going back to the 1980, when these markets first became accessible to foreign investors. We regard funds focusing on Latin America as contrarian investment opportunities for 2014 with great potential to produce gains once the world economy starts growing again.
Thirdly, Asian investments have produced mixed results in 2014. Japanese equities were very strong in the first part of the year due to their weak yen policy, but rolled over and now in a broad trading range. Many investors and commentators cheered the recently introduced economic reforms in China. We are keeping a close eye on investing opportunities not only in China, but also in India and fast growing South Korea. Unique opportunities may also present themselves in the so-called “frontier” markets, such as Vietnam.
Fidelity has many excellent international mutual funds, but the one that stands out, as a great tool to diversify core holdings is the Fidelity Diversified International Fund (FDIVX). The chart below shows that its management team has been highly successful in identifying the right investments and generate an outstanding 22% return for shareholders so far in 2013.
We all hope that 2014 will be as strong, as 2013 has been. In reality, financial markets seldom advance without any interruption. Our previous study showed that U.S. equities are overbought by historic standards and now ripe for a correction (see article). That is why we suggest our readers to review the model portfolios at FidelitySignal.com, which provide buy and sell signals, and E-mail alerts for specific Fidelity mutual funds.
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Fidelity Trends 