Is Fidelity Select Utilities (FSUTX) a Strong Mutual Fund Pick Right Now?
Any investors hoping to find a Sector - Utilities fund could think about starting with Fidelity Select Utilities (FSUTX). FSUTX holds a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.
Objective
FSUTX is classified in the Sector - Utilities segment by Zacks, an area full of potential. Sector - Utilities mutual funds focus on companies that provide essential servicessuch as electric power, gas distribution, and water supplyto millions of people on a daily basis. Overall, the utility industry is known for its stability and reduced volatility.
History of Fund/Manager
FSUTX is a part of the Fidelity family of funds, a company based out of Boston, MA. The Fidelity Select Utilities made its debut in December of 1981 and FSUTX has managed to accumulate roughly $1.18 billion in assets, as of the most recently available information. Douglas Simmons is the fund's current manager and has held that role since October of 2006.
Performance
Of course, investors look for strong performance in funds. This fund has delivered a 5-year annualized total return of 9.76%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 11%, 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. FSUTX's standard deviation over the past three years is 9.85% compared to the category average of 9.96%. The standard deviation of the fund over the past 5 years is 10.57% compared to the category average of 10.99%. This makes the fund less volatile than its peers over the past half-decade.
Risk Factors
One cannot ignore the volatility of this segment, however, as it is always important for investors to remember the downside to any potential investment. FSUTX lost 45.05% in the most recent bear market and underperformed comparable funds by 2%. This makes the fund a possibly worse choice than its peers during a sliding market environment.
Nevertheless, with a 5-year beta of 0.35, the fund is likely to be less volatile than the market average. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. FSUTX has generated a positive alpha over the past five years of 5.41, demonstrating that managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.
Expenses
As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FSUTX is a no load fund. It has an expense ratio of 0.76% compared to the category average of 1.21%. From a cost perspective, FSUTX is actually cheaper than its peers.
Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.
Bottom Line
Overall, Fidelity Select Utilities ( FSUTX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Fidelity Select Utilities ( FSUTX ) 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 - Utilities, make sure to go to www.zacks.com/funds/mutual-funds for additional information. Zacks provides a full suite of tools to help you analyze your portfolio - both funds and stocks - in the most efficient way possible.
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