Is Fidelity Environmental & Alt Energy a Top-Notch Mutual Fund Pick with a 2 (Buy) Zacks Rank?

Sector – Other Funds: A Closer Look at Fidelity Environmental & Alt Energy (FSLEX)

If you’re searching for a Sector – Other fund to invest in, one potential option is Fidelity Environmental & Alt Energy (FSLEX). With a Zacks Mutual Fund Rank of 2 (Buy), FSLEX has demonstrated strong forecasting factors like size, cost, and past performance.

History of Fund/Manager

Fidelity Environmental & Alt Energy is a part of the Fidelity family of funds, a company based out of Boston, MA. The fund debuted in June of 1989 and has since accumulated assets of about $476.35 million, according to the most recently available information. William Bower is the fund’s current manager and has held that role since August of 2021.

Performance

When it comes to Sector – Other funds, one of the key metrics investors look for is strong performance relative to their peers. FSLEX has delivered a 5-year annualized total return of 15.05%, placing it in the middle third among its category peers. If you’re interested in shorter time frames, do not dismiss looking at the fund’s 3 -year annualized total return of 8.19%, which places it in the bottom third during this time-frame.

It is essential to note that the product’s returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund’s [%] sale charge. If sales charges were included, total returns would have been lower.

When evaluating a fund’s performance, it is also crucial to consider the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. Over the past three years, FSLEX’s standard deviation comes in at 19.9%, compared to the category average of 21.35%. Over the past 5 years, the standard deviation of the fund is 21.19% compared to the category average of 21.25%. This makes the fund less volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.2, which means it is hypothetically more volatile than the market at large. Alpha is an additional metric to take into consideration, since it represents a portfolio’s performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. With a negative alpha of -2.24, managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Examining the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is principally on equities that are traded in the United States.

The mutual fund currently has 83.92% of its holdings in stocks, and these companies have an average market capitalization of $478 billion. The fund has the heaviest exposure to the following market sectors:

• Industrial Cyclical
• Technology
• Retail Trade

This fund’s turnover is about 38%, so the fund managers are making fewer trades than the average comparable fund.

Expenses

For investors, taking a closer look at cost-related metrics is key, since costs are increasingly important for mutual fund investing. Competition is heating up in this space, and a lower cost product will likely outperform its otherwise identical counterpart, all things being equal. In terms of fees, FSLEX is a no-load fund. It has an expense ratio of 0.69% compared to the category average of 0.85%. From a cost perspective, FSLEX 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. Fees charged by investment advisors have not been taken into consideration. Returns would be less if those were included.

Bottom Line

Overall, Fidelity Environmental & Alt Energy (FSLEX) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively similar performance, average downside risk, and lower fees, this fund looks like a great potential choice for investors right now. This could just be the start of your research on FSLEX in the Sector – Other category.