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Summary High expense ratio, but good reference point for diversification. The fund has shown strong growth over the last decade. FSRPX is invested in the retail market. There are several industries that make up the consumer cyclical category. Retail is one of these industries and has seen some changes over the last decade. There’s more to come with new generations wanting convenience in their shopping experience. Malls are an example of retail that is becoming outdated and starting to have vacancy problems. Online retail has been one of the major factors in people not leaving their house to shop. It’s says a lot when you can go to a mall with over one hundred stores and still have to travel to another location to get your grocery shopping done. Retail starting to see some changes brings great potential to any companies who can adapt to the future. The Fidelity® Select Retailing Portfolio (MUTF: FSRPX ) has succeeded in choosing companies that have done will with the changing retail market. FSRPX mostly invests in companies that deal with merchandising finished goods and services primarily to individual customers. Expense Ratio The expense ratio is .81% which I would like to see lower much lower. If I wanted exposure to the retail market based on FSRPX’s performance I would only use it as a reference point for what stocks to invest in. The ratio is quite a bit lower than the category average, but that’s rarely ever a good comparison with how high some funds like to charge. With how well the fund has performed I believe the ratio wouldn’t deter me from investing if I wasn’t able to directly invest in the stocks. High ratios are always a major annoyance in a down market and why I tend to stay away from them. There was a management change in 2014. The fund continues to beat the S&P 500, but it’s hard to tell if that has anything to do with management or just how well Amazon (NASDAQ: AMZN ) has performed. Amazon is 15.7% of the fund’s holdings and has exploded this last year which could explain the continued performance of FSRPX. Diversification Here are the top ten holdings in the company: It’s daunting to see so much equity in not only the top ten holdings, but also 22.1% being in the top 2 companies out of 48. With 67.6% being in ten companies there is a lot of volatility risk. Management has done a good job in choosing stocks that have potential earnings growth compared to the benchmark: MSCI IMI Retailing 25/50. I was also excited to see that many of the holdings have good international potential. International exposure is always a great way for companies to grow when the domestic market is showing some stagnation. With how much equity this fund has in the top two holdings it’s a good idea to see how they are doing. Home Depot, Inc. (NYSE: HD ) has been performing extremely well and especially over the last several years beating the S&P by a large amount. HD is not only in a good retail market, but also has been a solid growing company. Analysts have been bullish on HD which could slow gains down, especially over a short period of time. I’m bullish on HD for a long term investment but wouldn’t expect a lot of growth over a short time horizon unless they exceed analysts’ current bullish forecasts. The housing market is looking steady for the time being, but keep in mind a hit to housing is a direct hit to HD. Amazon has been on a massive run lately and I like to think of it as a cube instead of a bubble. Their actions mimic the Star Trek’s Borg more than it does a bubble about to burst. While their PE ratio may scare many, it excites me that Amazon just floats around assimilating everything. Amazon has done a lot to help retail go in the right direction. Online retail is extremely convenient for customers. Amazon Prime is a great resource for people and those who have it are generally content. AWS, Amazon Web Services, is just another way Amazon has taken something clunky and made it into something flexible and easy to use. The cloud computing services offered by Amazon is not only inexpensive, but also has great scalability. There’s probably a plethora of hoops AMZN will have to jump through, but Amazon Prime Air is another great idea that will move shipping in the right directions for customers. Performance (click to enlarge) The fund has outperformed the S&P and its benchmark. There isn’t as much diversification which causes the potential for more volatility, but there is a track record for investing in companies that have done well over a long period of time. The two most notable years were the fund taking only a -29.58% hit in 2008, but still having the most growth in 2009 with 57.82%. Do note without these two years there isn’t much different than compared to the market. Retail as a whole has done better than the S&P 500 in 2015. Scalper1 News
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