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Is Fidelity Select Pharmaceuticals (FPHAX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research

Having trouble finding a Sector - Health fund? Fidelity Select Pharmaceuticals (FPHAX) is a potential starting point. FPHAX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

We note that FPHAX is a Sector - Health fund, and this area is also loaded with various options. Sector - Health mutual funds give investors an opportunity to focus on one of the largest sectors of the American economy, healthcare. Funds in this category can include everything from for-profit hospitals to pharmaceutical companies and medical device manufacturers.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FPHAX. Fidelity Select Pharmaceuticals debuted in June of 2001. Since then, FPHAX has accumulated assets of about $766.48 million, according to the most recently available information. The fund's current manager, Karim Suwwan de Felipe, has been in charge of the fund since July of 2017.

Performance

Of course, investors look for strong performance in funds. This fund carries a 5-year annualized total return of 3.79%, and is in the top third among its category peers. If you're interested in shorter time frames, do not dismiss looking at the fund's 3-year annualized total return of 10.54%, which places it in the top third during this time-frame.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Compared to the category average of 17.13%, the standard deviation of FPHAX over the past three years is 13.47%. The standard deviation of the fund over the past 5 years is 14.47% compared to the category average of 18.19%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should always remember the downsides to a potential investment, and this segment carries some risks one should be aware of. FPHAX lost 34.71% in the most recent bear market and underperformed comparable funds by 1%. This makes the fund a possibly worse choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 0.83, so it is likely going to be less volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. Over the past 5 years, the fund has a negative alpha of -3.33. This means that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FPHAX is a no load fund. It has an expense ratio of 0.79% compared to the category average of 1.36%. Looking at the fund from a cost perspective, FPHAX is actually cheaper than its peers.

This fund requires a minimum initial investment of $0, while there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Select Pharmaceuticals ( FPHAX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

For additional information on this product, or to compare it to other mutual funds in the Sector - Health, make sure to go to www.zacks.com/funds/mutual-funds for additional information. And don't forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.


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