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Is Fidelity Select Health Care (FSPHX) a Strong Mutual Fund Pick Right Now?

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If investors are looking at the Sector - Health fund category, Fidelity Select Health Care (FSPHX - Free Report) could be a potential option. FSPHX has a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

Zacks categorizes FSPHX as Sector - Health, a segment packed with options. Sector - Health mutual funds offer investors a focus on the healthcare industry, one of the largest sectors in the American economy. These funds can include everything from pharmaceutical companies to medical device manufacturers and for-profit hospitals.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FSPHX. Fidelity Select Health Care made its debut in July of 1981, and since then, FSPHX has accumulated about $7.84 billion in assets, per the most up-to-date date available. The fund is currently managed by Edward Yoon who has been in charge of the fund since October of 2008.

Performance

Of course, investors look for strong performance in funds. This fund in particular has delivered a 5-year annualized total return of 10.76%, and it sits 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 20.53%, 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. The standard deviation of FSPHX over the past three years is 16.71% compared to the category average of 16.97%. Looking at the past 5 years, the fund's standard deviation is 17.2% compared to the category average of 18.03%. 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. FSPHX lost 39.99% in the most recent bear market and underperformed its peer group by 6%. These results could imply that the fund is a worse choice than its peers during a sliding market environment.

Nevertheless, investors should also note that the fund has a 5-year beta of 1.06, which means it is hypothetically more volatile than the market at large. 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 negative alpha over the past 5 years of -0.7, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FSPHX is a no load fund. It has an expense ratio of 0.71% compared to the category average of 1.36%. From a cost perspective, FSPHX 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 Health Care ( FSPHX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, this fund looks like a good potential choice for investors right now.

This could just be the start of your research on FSPHXin the Sector - Health category. Consider going to www.zacks.com/funds/mutual-funds for additional information about this fund, and all the others that we rank 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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