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

Sweta Killa
Zynerba Pharmaceuticals (ZYNE) closed the most recent trading day at $13.91, moving +0.87% from the previous trading session.

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.

Retail and institutional investors increasingly turn to passively managed ETFs because they offer low costs, transparency, flexibility, and tax efficiency; these kind of funds are also excellent vehicles for long term investors.

Sector ETFs are also funds of convenience, offering many ways 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 14, placing it in bottom 13%.

Index Details

The fund is sponsored by Fidelity. It has amassed assets over $206.01 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

Since cheaper funds tend to produce better results than more expensive funds, assuming all other factors remain equal, it is important for investors to pay attention to an ETF's expense ratio.

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 1.98%.

Sector Exposure and Top Holdings

While ETFs offer diversified exposure, which minimizes single stock risk, a deep look into a fund's holdings is a valuable exercise. And, 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 11.50% of total assets, followed by Dowdupont Inc (DWDP) and Ecolab Inc (ECL).

The top 10 holdings account for about 52.32% of total assets under management.

Performance and Risk

So far this year, FMAT has added about 7.95%, and is down about -10.26% in the last one year (as of 05/23/2019). During this past 52-week period, the fund has traded between $26.67 and $35.34.

The ETF has a beta of 1.18 and standard deviation of 15.51% for the trailing three-year period, making it a medium risk choice in the space. With about 122 holdings, it effectively diversifies company-specific risk.

Alternatives

Fidelity MSCI Materials Index ETF sports a Zacks ETF Rank of 4 (Sell), which is based on expected asset class return, expense ratio, and momentum, among other factors. FMAT, then, is not the best option for investors seeking exposure to the Materials ETFs segment of the market. However, there are better ETFs in the space to consider.

Materials Select Sector SPDR Fund (XLB) tracks Materials Select Sector Index and the FlexShares Morningstr Globl Upstream Naturl Resourcs Indx Fund (GUNR) tracks Morningstar Global Upstream Natural Resources Index. Materials Select Sector SPDR Fund has $3.27 B in assets, FlexShares Morningstr Globl Upstream Naturl Resourcs Indx Fund has $5.42 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
 
Materials Select Sector SPDR Fund (XLB): ETF Research Reports
 
Dow Chemical Company (The) (DWDP) : Free Stock Analysis Report
 
Praxair, Inc. (LIN) : Free Stock Analysis Report
 
FlexShares Morningstr Globl Upstream Naturl Resourcs Indx Fund (GUNR): ETF Research Reports
 
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