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Which Communications Fund to Buy: SLMCX or FBMPX?

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The communications industry is clearly gathering steam under the current circumstances as people around the globe are forced to stay at home in a bid to avoid contracting the novel coronavirus. After top public health experts warned that the number of casualties in the United States alone could reach as many as 200,000, President Donald Trump extended the stringent social distancing period on Mar 29.

With the lockdown period stretched until April-end, Americans are definitely going to spend most of their time on social media, communicating via text messages and video conferencing etc. Also, since these social distancing measures are applicable to workplaces, those working remotely will continue to abide by this rule through April 30. 

Second, technology has been the top gaining sector of the S&P 500 Index over a period of five years, which is reflective of consistent demand for the sector’s products and services. After all, the sector has surged 95.6% since 2015 compared with the broader market’s increase of 25.9% in the same timeframe.

This is why investing in mutual funds from the communications industry is an ideal move right now. Let us compare two well-ranked funds from this space, each with a Zacks Mutual Fund Rank #2 (Buy), and find out which is the best fund for investment purposes.

Columbia Seligman Communications and Information Fund Class A (SLMCX - Free Report)

The fund invests the majority of its assets in securities of companies that operate in the communications, information and related industries. The non-diversified fund aims for capital growth. The fund may also invest a smaller portion of its assets in foreign investments.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 16.7% over the 3-year and 15.9% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.  

The Fidelity Select Health Care Services Portfolio fund, as of the last filing, allocates its assets in top two major groups — Large Growth and Foreign Stock. Further, as of the last filing, Lam Research, Apple Inc and Broadcom Inc were the top holdings for SLMCX.

SLMCXwas incepted in June 1983 and is managed by Columbia Management Investment. The fund carries an expense ratio of 1.24% and requires a minimal initial investment of $2000.

Fidelity Select Communication Services Portfolio (FBMPX - Free Report)

The fund aims for capital growth. It invests the majority of its assets in securities of companies that are mostly engaged in the development, production or distribution of communication services. The non-diversified fund invests in securities of both U.S. and non-U.S. issuers. FBMPX primarily invests in common stocks of companies.

This Sector-Tech product has a history of positive total returns for over 10 years. Specifically, the fund’s returns are 8.1% over the 3-year and 7.4% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here

The Fidelity Select Health Care Services Portfolio fund, as of the last filing, allocates its assets in top two major groups — Large Growth and Small Value. Further, as of the last filing, Alphabet Inc A, Facebook Inc A and Activision Blizzard Inc were the top holdings for FBMPX.

FBMPX was incepted in June 1986 and is managed by Fidelity. The fundcarries an expense ratio of 0.82% and requires a minimal initial investment of $0.

To Conclude

While both SLMCXand FBMPX are recommended buys, upon having a closer look, we find that the former clearly beats the latter in terms of returns. Of course, SLMCX is much more expensive compared to FBMPX and the former has higher risk associated with it (SLMCX has a beta of 1.26 against FBMPX’s beta of 0.88). Further, SLMCX’s administrative and other operating expenses are also higher than that of FBMPX.

But given the wide margin between the two funds’ returns, investors could consider taking higher risks in a bid to receive the clearly impressive sum SLMCX offers.

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