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Should You Invest in the Fidelity MSCI Materials Index ETF (FMAT)?

Zacks Equity Research

Designed to provide broad exposure to the Materials - Broad segment of the equity market, the Fidelity MSCI Materials Index ETF (FMAT) is a passively managed exchange traded fund launched on 10/21/2013.

An increasingly popular option among retail and institutional investors, passively managed ETFs offer low costs, transparency, flexibility, and tax efficiency; they are also excellent vehicles for long term investors.

Investor-friendly, sector ETFs provide many options to gain low risk and diversified exposure to a broad group of companies in particular sectors. Materials - Broad is one of the 16 broad Zacks sectors within the Zacks Industry classification. It is currently ranked 15, placing it in bottom 6%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $218.69 M, making it one of the average sized ETFs attempting to match the performance of the Materials - Broad segment of the equity market. FMAT seeks to match the performance of the MSCI USA IMI Materials Index before fees and expenses.

MSCI USA IMI Materials Index represents the performance of the materials sector in the U.S. equity market.

Costs

When considering an ETF's total return, expense ratios are an important factor, and cheaper funds can significantly outperform their more expensive counterparts in the long term if all other factors remain equal.

Annual operating expenses for this ETF are 0.08%, making it the least expensive product in the space.

It has a 12-month trailing dividend yield of 2.02%.

Sector Exposure and Top Holdings

Even though ETFs offer diversified exposure that minimizes single stock risk, investors should also look at the actual holdings inside the fund. Luckily, most ETFs are very transparent products that disclose their holdings on a daily basis.

This ETF has heaviest allocation in the Materials sector--about 100% of the portfolio.

Looking at individual holdings, Linde Plc (LIN) accounts for about 12.52% of total assets, followed by Air Products + Chemicals Inc (APD) and Ecolab Inc (ECL).

The top 10 holdings account for about 50.49% of total assets under management.

Performance and Risk

Year-to-date, the Fidelity MSCI Materials Index ETF has lost about -6.32% so far, and is up about 7.64% over the last 12 months (as of 02/03/2020). FMAT has traded between $29.48 and $34.33 in this past 52-week period.

The ETF has a beta of 1.26 and standard deviation of 15.45% for the trailing three-year period, making it a medium risk choice in the space. With about 125 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Materials Index ETF holds a Zacks ETF Rank of 2 (Buy), which is based on expected asset class return, expense ratio, and momentum, among other factors. Because of this, FMAT is an outstanding option for investors seeking exposure to the Materials ETFs segment of the market. There are other additional ETFs in the space that investors could consider as well.

Materials Select Sector SPDR ETF (XLB) tracks Materials Select Sector Index and the FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR ETF has $3.93 B in assets, FlexShares Morningstar Global Upstream Natural Resources ETF has $5.09 B. XLB has an expense ratio of 0.13% and GUNR charges 0.46%.

Bottom Line

To learn more about this product and other ETFs, screen for products that match your investment objectives and read articles on latest developments in the ETF investing universe, please visit Zacks ETF Center.


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Fidelity MSCI Materials Index ETF (FMAT): ETF Research Reports
 
Ecolab Inc. (ECL) : Free Stock Analysis Report
 
Air Products and Chemicals, Inc. (APD) : Free Stock Analysis Report
 
Materials Select Sector SPDR ETF (XLB): ETF Research Reports
 
Linde plc (LIN) : Free Stock Analysis Report
 
FlexShares Morningstar Global Upstream Natural Resources ETF (GUNR): ETF Research Reports
 
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