Is Fidelity Select Utilities (FSUTX) a Strong Mutual Fund Pick Right Now?

Zacks Equity Research
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If you have been looking for Sector - Utilities funds, a place to start could be 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

Fidelity is based in Boston, MA, and is the manager of FSUTX. Since Fidelity Select Utilities made its debut in December of 1981, FSUTX has garnered more than $1.38 billion in assets. The fund's current manager, Douglas Simmons, has been in charge of the fund since October of 2006.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 10.82%, 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 17.21%, 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. Over the past three years, FSUTX's standard deviation comes in at 9.03%, compared to the category average of 8.97%. The standard deviation of the fund over the past 5 years is 10.61% compared to the category average of 10.35%. This makes the fund more 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. In FSUTX's case, the fund lost 45.05% in the most recent bear market and outperformed its peer group by 0%. This makes the fund a possibly on par choice than its peers during a sliding market environment.

Nevertheless, with a 5-year beta of 0.3, the fund is likely to be less volatile than the market average. Because alpha represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which is the S&P 500 in this case, one should pay attention to this metric as well. The fund has produced a positive alpha over the past 5 years of 6.6, which shows that managers in this portfolio are skilled in picking 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, FSUTX is a no load fund. It has an expense ratio of 0.75% compared to the category average of 1.26%. From a cost perspective, FSUTX is actually cheaper than its peers.

Investors should also note that the minimum initial investment for the product is $0 and that 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.

Don't stop here for your research on Sector - Utilities funds. We also have plenty more on our site in order to help you find the best possible fund for your portfolio. Make sure to check out www.zacks.com/funds/mutual-funds for more information about the world of funds, and feel free to compare FSUTX to its peers as well for additional information. If you want to check out our stock reports as well, make sure to go to Zacks.com to see all of the great tools we have to offer, including our time-tested Zacks Rank.


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