Large Price Drop of Multiple Fidelity Funds is due to Capital Gains Distribution

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:

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Sector Rotation: Electronics, Medical Equipment and Real Estate Funds are Top Performers

The S&P 500 index has reached an all time high again, as the bull market resumed after a brief correction in March. The top 10 Fidelity mutual funds in the current market environment show representation from multiple industries and this broad-based advance is considered a bullish sign for the overall market.

We’d like to highlight three Fidelity funds here, the Fidelity Select Electronics (FSELX), the Fidelity Select Medical Equipment (FSMEX) and the Fidelity Real Estate Portfolio (FRESX) funds. These funds stand out, because their respective sectors are well positioned to lead the market advance.

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Sector Rotation: Real Estate, Healthcare, Technology and Gold Funds are Emerging as the Strongest Investments in the Current Market Environment

While the benchmark Fidelity Spartan U.S. Equity Index Fund (FUSEX), which is Fidelity’s S&P 500 index fund, barely moved higher today, multiple sector funds continue to show increased relative strength and may become promising equity investments for the next weeks or months. The first chart shows that FUSEX bounced off of the blue support line following the January market sell off and just barely holding above the 100-day moving average:

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The next chart shows that Fidelity Real Estate Fund (FRESX) is one of the most interesting opportunities to watch for in the next few weeks. The top part of the chart displays the relative strength, which is the ratio of FRESX versus the S&P 500 index. The blue arrow indicates that the relative strength is improving for this sector starting from the beginning of January. Indeed, FRESX did not correct as much as FUSEX in the recent sell off and has already broken out to a new high for the year. The 1-year chart also shows that FRESX has not yet established a clear bullish trend, but the price action is promising.

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The long-term picture for the technology and healthcare sectors is very different from real estate, as these large sectors have performed very well last year, but did not correct hard in January, and their relative performance compared to the broad market indexes continue to improve. Fidelity has multiple select funds for both of these sectors. We show here two examples of health care funds (FSPHX and FSMEX), which continue to provide excellent returns:

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The following two charts show examples of two Fidelity technology funds (FSELX and FSPTX) with increasing relative strength and promising outlook:

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One of the most interesting recent developments has been the strong rally of gold mining stocks. As the result, the Fidelity Select Gold Fund (FSAGX) has gained 11.74% already this year.  The five year chart below shows that FSAGX reached its peak in 2011, but dropped in the following year and a half by almost 68% to reach the most recent low in last December. The blue downtrend line appears to be broken now, but since the gold mining sector can be highly volatile, investors should be very cautious with taking large positions in this sector until a clear uptrend gets established. For example, in the second half of 2012 gold made a similar bullish move, but resumed its bear market for another year:

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Source: FidelitySignal.com

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Large Price Drop of Fidelity Select Sector Funds is due to Capital Gains Distribution

The large price drop of several Fidelity mutual funds may have alarmed investors today. But it turns out that there is no reason to panic. The drop in the net asset value (NAV) of these funds was due to the annual distribution of capital gains, and also to a smaller extent, dividends.

Looking on the bright side, large distributions are reflective of large gains in 2013. Indeed, 2013 has been an exceptionally strong year for equities. Unless we experience an unexpected sell-off in the last 11 days of the year, 2013 will become the best year in equities, since 1999. Of course, this makes many investors fearful of downside volatility in 2014. But for now, lets focus our attention on closing the year, especially if it involves mutual fund investments that have produced excellent gains for investors.

So, lets take a look at examples of Fidelity funds with large price drops that are due to capital gains distributions:

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More information:

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Sector Rotation: Fidelity Select Medical Equipment and Systems Fund

Fidelity Select Medical Equipment and Systems Fund (FSMEX, last change: 1.44%)

I highlighted the Select Medical Equipment and Systems Fund (FSMEX, last change: 1.44%) in the June 7 blog, as one of the best-performing Fidelity Select sector funds. FSMEX continues to perform well and reached another 52-week high, in spite of the recent market pullback.

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

Sector Rotation: New 52-Week High for the Fidelity Select Medical Equipment and Systems Fund

Fidelity Select Medical Equipment and Systems Fund (FSMEX, last change: 0.82%)

In spite of worries about the potential move by the Fed to slow down its QE program, several sectors show renewed momentum. For example, the Fidelity Select Medical Equipment and Systems Fund (FSMEX, last change: 0.82%) has made a new 52-week high today and shows no sign of slowing down.

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