On Friday, several Fidelity funds experienced large drops of their net asset values (NAVs). For example, the Fidelity Magellan fund showed a 5.57% drop. Other examples include the Latin America Fund (down 17.79%), the China Region Fund (down 9.2%) and the Select Technology Fund (down 6%).
The explanation is that Friday was the ex. date for the distributions of many Fidelity funds. The pay date for the funds is on Monday, December 9. For investors who chose to reinvest the distributions automatically, the value of their holdings will be adjusted on Monday. For investors who chose not to reinvest, their investment account will be credited by the distribution amounts.
The December dividends and the capital gains distributions for Fidelity funds are available on the following website:
The biotech sector was one of the hardest hit in the stock market sell-off today. However, the one-year chart of the Fidelity Select Biotechnology Fund (FBIOX) shows that the bull market is still intact. The chart also shows that corrections are normal, but to confirm the bullish trend, we would like to see FBIOX making a new high again in the next few weeks.
The reason for the importance of the biotechnology trend is that this sector has led the bull market of 2013. FBIOX turned out to be an excellent way to invest in the biotech sector, just as in past bull markets (e.g. 1999 and 2003). And just as in the past, market leading sectors (and the corresponding Fidelity mutual funds) making higher highs and higher lows were required to propel the broad market indexes higher.
In our November 17 blog we looked at the chart pattern of Fidelity Select Gold Fund (FSAGX) and observed that if FSAGX holds its support, we could make a bullish case. Unfortunately the gold sector did not hold its support and now resumed the bear market.
Gold is the worst performing asset class in 2013 by far due to the fundamentals, including low and decreasing inflation, and low demand from Asia. The recent sell-off was triggered by renewed fears about an early tapering by the Fed, which in turn would strengthen the dollar and weaken gold. However, since gold prices are approaching production costs, we would not be surprised to see gold establishing a new support level in 2014. At that point gold stocks will be worth considering again as an investment.
High-flying stock market sectors have received a lot of news media attention this year, since the top sectors have produced outsized returns. For example, the Fidelity Select Biotechnology Fund (FBIOX) has gained 62.54% so far in 2013.
Will this performance continue in 2014? History of the stock market tells us that it is unlikely. In fact, we have to go back to 1999 to see similar returns. And we all know what happened in the aftermath of the speculative stock market bubble in 2000.
Looking ahead to 2014 most economist draw a picture of continued economic growth in the U.S. The problem is that this can lead to an early decision by the Fed to taper the QE3 program, which will likely to have a cooling effect on equity markets.
As we consider the best investments for 2014, it is worth taking a closer look at value investing again. Value investing is a risk-averse approach for investors who would like to participate in the equity markets, but are worried about the potential of a large stock market correction in 2014.
Our favorite investment in this space is the Fidelity Value Fund (FDVLX). FDVLX has returned 36.85% since November 30, 2012, when FidelitySignal.com issued the buy signal. The chart below shows that FDVLX has been a solid investment in 2013 and the bullish trend continues to stay uninterrupted.
In a quiet market session today the Fidelity Select Multimedia Fund (FBMPX) stood out as one of the most exciting investments. FBMPX made a fresh high at the close and shows no signs of slowing down after a stellar 36.76% year-to-date return.
The top holdings for FBMPX include media and broadcasting companies, such as Disney. Time Warner, CBS, Comcast ad Viacom. While this year a lot of attention was focused on social media and green energy stocks, it turns out that smartly managed media companies providing content that consumers love have delivered better returns again.
The Fidelity Select Defense & Aerospace Fund has been an outstanding investment throughout 2013 with an excellent 41.57% year-to-date return. Top holdings include defense companies, such as United Technologies (UTX), Boeing (BA) and Precision Castparts (PCP).
The chart shows that FSDAX has accelerated its momentum and now moved up to the #4 ranked position on the Top 10 Fidelity Mutual Funds list. The next few trading sessions will show how much impact the Iran nuclear deal has on the defense sector and what to expect from FSDAX, as an investment.
U.S. equities have been making new highs almost daily and 2013 is clearly shaping up as one of the strongest bull markets of recent market history. But how dangerous is this market for investors looking to commit new capital?
The chart below shows the 15-year performance of the Fidelity Spartan U.S. Equity Index Fund (FUSEX) using monthly bars. This long-term chart shows that the great bull market of 2013 is still intact and has advanced without any serious interruption since December 2012.
However, a closer look at the RSI indicator (a technical indicator that measures overbought/oversold conditions) on the top of the chart shows an overbought condition. While the bull market can continue its positive momentum for weeks or months, U.S. equities are increasingly vulnerable to a serious correction or even a crash.
The S&P 500 index closed above 1,800 for the first time. The Dow also made a new high today, indicating a very bullish stock market.
The biggest gainer today was the biotechnology sector. The Fidelity Select Biotechnology Fund (FBIOX) was up 3.15% and continues to be the best performer of 2013 with an incredible 60.05% year-to-date gain. FBIOX shows a highly bullish chart pattern, since it broke through the blue resistance line.
The Dow Jones Industrial average moved above the psychologically important 16,000 level today, the first time in the history of the stock market. This is clearly a sign that the great bull market of 2013 is still intact.
As we approach the seasonally strong December, it is worth taking a closer look at where the market leadership is coming from. The table below shows the top 10 Fidelity mutual funds ranked by momentum, courtesy of FidelitySignal.com.
Top 10 Fidelity Mutual Funds by momentum
The table shows that the Fidelity Select Leisure Fund (FDLSX) is moving up the fastest in the momentum ranking. In addition, FDLSX had the largest gain today out of all Fidelity mutual funds. The ranking also shows that today’s rally is broad based, which usually is highly bullish for the stock market.
The worst performing Fidelity mutual fund currently is the Fidelity Select Gold Fund (FSAGX) according to the fund ranking provided by FidelitySignal.com. Often, laggards become next year’s winners, and this is just one of the reasons for investors to pay attention to gold.
FSAGX is also forming a triple bottom chart pattern. If the support holds (see blue line on the chart), then it will be a very bullish chart formation for gold stocks. In addition, recent 13F filings indicate that hedge funds are buying gold bullion and gold mining stocks again.