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Is Fidelity Select Energy Service (FSESX) a Strong Mutual Fund Pick Right Now?

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If you have been looking for Sector - Energy funds, it would not be wise to start your search with Fidelity Select Energy Service (FSESX - Free Report) . FSESX has a Zacks Mutual Fund Rank of 4 (Sell), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes FSESX as Sector - Energy, a segment packed with options. Sector - Energy mutual funds encompass a wide range of vastly changing and vitally important industries throughout this massive global sector. Oil and gas comprise the bulk of the exposure here, and carbon-based fuels are going to be the majority of assets in these funds. However, clean energy is starting to pick up steam.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FSESX. Since Fidelity Select Energy Service made its debut in December of 1985, FSESX has garnered more than $437.16 million in assets. The fund's current manager, Ben Shuleva, has been in charge of the fund since August of 2013.

Performance

Of course, investors look for strong performance in funds. FSESX has a 5-year annualized total return of -3.23% and is in the bottom 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 -4.26%, which places it in the middle 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 21.55%, the standard deviation of FSESX over the past three years is 26.56%. The standard deviation of the fund over the past 5 years is 24.29% compared to the category average of 19.03%. 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 the most recent bear market, FSESX lost 64.5% and underperformed comparable funds by 9.18%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Investors should note that the fund has a 5-year beta of 1.12, so it is likely going to be more volatile than the market at large. 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. FSESX's 5-year performance has produced a negative alpha of -15.98, which means managers in this portfolio find it difficult to pick 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, FSESX is a no load fund. It has an expense ratio of 0.81% compared to the category average of 1.44%. FSESX is actually cheaper than its peers when you consider factors like cost.

While the minimum initial investment for the product is $2,500, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Select Energy Service has a low Zacks Mutual Fund rank, and in conjunction with its comparatively weak performance, worse downside risk, and lower fees, this fund looks like a somewhat weak choice for investors right now.

Don't stop here for your research on Sector - Energy 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 FSESX to its peers as well for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.




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