Consumer Cyclicals are Hot Again; Why are Retailers Attracting Long-Term Investors

In a previous blog post we wrote about the strong performance of the consumer discretionary (cyclicals) sector:

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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):

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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:

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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.

 

Click here to see the best and worst sector funds. The ratings are provided by FidelitySectorReport.com.

 

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Top 10 Fidelity Mutual Funds

Following the announcement of the Fed’s tapering decision stocks rallied, while bonds sold off. This shows that equities remain the best investment asset class, as the end of 2013 comes to a close in two weeks.

What are the best-performing Fidelity funds that allow investors to take advantage of the current trend? The table below shows the 10 highest-ranked Fidelity funds based on their three-month return.

The top 10 list includes funds that invest in a diverse set of industry sectors, such as transportation, finance, technology, health care and retailing. This broad-based participation is the sign of a healthy bull market.

Also, it is important to note that all of the highest ranked funds represent U.S. sector investments, as U.S. equities have outperformed international investments for most of the year.

Top 10 Fidelity Funds

Source: FidelitySignal.com

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Top 7 Fidelity Select Funds for Sector Rotation Strategies

The stock market reacted positively to a better-than-expected job report today with all major indexes closing higher. The rally came as a relief after days of selling in both global and U.S. markets.

The market leading investments for the first six months of 2013 were Japanese stocks and the U.S. biotechnology sector. Now, as the summer gets under way, new sectors are emerging with the potential to take over market leadership.

The newly emerging sectors with increasing momentum include the automotive, health care, brokerage, defense, insurance, retailing and consumer discretionary sectors. We’ll be tracking the corresponding Fidelity Select funds closely for the next few weeks for early signs of the summer rally.

The Top 7 Fidelity Select funds with market leading momentum to be considered for sector rotation strategies are:

Fidelity Select Automotive Fund (FSAVX, last change: 2.00%)

Fidelity Select Automotive Fund (FSAVX, last change: 2.00%)

Fidelity Select Health Care Fund (FSPHX, last change: 1.38%)

Fidelity Select Health Care Fund (FSPHX, last change: 1.38%)

Fidelity Select Brokerage and Investment Fund (FSLBX, last change: 2.23%)

Fidelity Select Brokerage and Investment Fund (FSLBX, last change: 2.23%)

Fidelity Select Defense and Aerospace Fund (FSDAX, last change: 1.38%)

Fidelity Select Defense and Aerospace Fund (FSDAX, last change: 1.38%)

Fidelity Select Insurance Fund (FSPCX, last change: 1.56%)

Fidelity Select Insurance Fund (FSPCX, last change: 1.56%)

Fidelity Select Retailing Fund (FSRPX, last change: 1.74%)

Fidelity Select Retailing Fund (FSRPX, last change: 1.74%)

Fidelity Select Consumer Discretionary Fund (FSCPX, last change: 1.71%)

Fidelity Select Consumer Discretionary Fund (FSCPX, last change: 1.71%)

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