Is Fidelity Select Defense & Aerospace (FSDAX) a Strong Mutual Fund Pick Right Now?

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On the lookout for a Sector – Other fund? Starting with Fidelity Select Defense & Aerospace (FSDAX) is one possibility. FSDAX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Load Error

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FSDAX. Since Fidelity Select Defense & Aerospace made its debut in May of 1984, FSDAX has garnered more than $1.79 billion in assets. Jonathan Siegmann is the fund’s current manager and has held that role since October of 2015.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund carries a 5-year annualized total return of 14.63%, and is in the top third among its category peers. Investors who prefer analyzing shorter time frames should look at its 3-year annualized total return of 6.21%, 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. Compared to the category average of 26.13%, the standard deviation of FSDAX over the past three years is 28.17%. The standard deviation of the fund over the past 5 years is 22.96% compared to the category average of 21.32%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should note that the fund has a 5-year beta of 1.27, 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. FSDAX has generated a negative alpha over the past five years of -4.8, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

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, FSDAX is a no load fund. It has an expense ratio of 0.76% compared to the category average of 1.27%. So, FSDAX is actually cheaper than its peers from a cost perspective.

While the minimum initial investment for the product is $0, investors should also note that there is no minimum for each subsequent investment.

Bottom Line

Overall, Fidelity Select Defense & Aerospace ( FSDAX ) 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 FSDAXin the Sector – Other 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. And don’t forget, Zacks has all of your needs covered on the equity side too! Make sure to check out Zacks.com for more information on our screening capabilities, Rank, and all our articles as well.

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