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Is Fidelity Advisor Financial Services A (FAFDX) a Strong Mutual Fund Pick Right Now?

Having trouble finding a Sector - Finance fund? Fidelity Advisor Financial Services A (FAFDX) is a potential starting point. FAFDX carries a Zacks Mutual Fund Rank of 1 (Strong Buy), which is based on nine forecasting factors like size, cost, and past performance.

Objective

FAFDX is part of the Sector - Finance section, which boasts an array of other possible selections. Sector - Finance funds offer a stable, diversified approach to investing that focuses on the financial industry, an infamously large, complex, and heavily-regulated space. Funds here can include insurance companies and exchanges, as well as banks and investment giants. Investors should note that interest rates may also impact players in this market.

History of Fund/Manager

FAFDX is a part of the Fidelity family of funds, a company based out of Boston, MA. Fidelity Advisor Financial Services A debuted in September of 1996. Since then, FAFDX has accumulated assets of about $140.90 million, according to the most recently available information. The fund's current manager, Matt Reed, has been in charge of the fund since June of 2019.

Performance

Of course, investors look for strong performance in funds. FAFDX has a 5-year annualized total return of 8.25% 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 13.03%, 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 FAFDX over the past three years is 15.96% compared to the category average of 11.58%. Over the past 5 years, the standard deviation of the fund is 15.05% compared to the category average of 11.48%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

It's always important to be aware of the downsides to any future investment, so one should not discount the risks that come with this segment. FAFDX lost 69.81% in the most recent bear market and underperformed its peer group by 7%. This might suggest that the fund is a worse choice than its peers during a bear market.

Even still, the fund has a 5-year beta of 1.09, so investors should note that it is hypothetically more volatile than the market at large. Another factor to consider is alpha, as it reflects a portfolio's performance on a risk-adjusted basis relative to a benchmark-in this case, the S&P 500. The fund has produced a negative alpha over the past 5 years of -2.85, which shows that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Exploring 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 mostly on equities that are traded in the United States.

As of the last filing date, the mutual fund has 89.93% of its assets in stocks, with an average market capitalization of $85.85 billion. With turnover at about 67%, this fund is 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, FAFDX is a load fund. It has an expense ratio of 1.07% compared to the category average of 1.57%. From a cost perspective, FAFDX is actually cheaper than its peers.

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 Advisor Financial Services A ( FAFDX ) 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.

Want even more information about FAFDX? Then go over to Zacks.com and check out our mutual fund comparison tool, and all of the other great features that we have to help you with your mutual fund analysis 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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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.