Is Fidelity Select Biotechnology (FBIOX) a Strong Mutual Fund Pick Right Now?

Zacks categorizes FBIOX as Sector - Health, a segment packed with options. Sector - Health mutual funds offer investors a focus on the healthcare industry, one of the largest sectors in the American economy. These funds can include everything from pharmaceutical companies to medical device manufacturers and for-profit hospitals.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FBIOX. Fidelity Select Biotechnology debuted in December of 1985. Since then, FBIOX has accumulated assets of about $5.93 billion, according to the most recently available information. Rajiv Kaul is the fund's current manager and has held that role since October of 2005.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. FBIOX has a 5-year annualized total return of 8.11%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 23.95%, which places it in the top third during this time-frame.

It is important 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 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. FBIOX's standard deviation over the past three years is 20.44% compared to the category average of 16.28%. Over the past 5 years, the standard deviation of the fund is 20.47% compared to the category average of 16.82%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

Investors should not forget about beta, an important way to measure a mutual fund's risk compared to the market as a whole. FBIOX has a 5-year beta of 0.57, which means it is likely to be less volatile than the market average. 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. FBIOX's 5-year performance has produced a positive alpha of 0.19, which means managers in this portfolio are skilled in picking securities that generate better-than-benchmark returns.

Expenses

As competition heats up in the mutual fund market, costs become increasingly important. Compared to its otherwise identical counterpart, a low-cost product will be an outperformer, all other things being equal. Thus, taking a closer look at cost-related metrics is vital for investors. In terms of fees, FBIOX is a no load fund. It has an expense ratio of 0.62% compared to the category average of 1.08%. So, FBIOX is actually cheaper than its peers from a cost perspective.

Investors should also note that the minimum initial investment for the product is $0 and that 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 Select Biotechnology ( FBIOX ) has a high Zacks Mutual Fund rank, and in conjunction with its comparatively strong performance, average downside risk, and lower fees, Fidelity Select Biotechnology ( FBIOX ) looks like a good potential choice for investors right now.

For additional information on the Sector - Health area of the mutual fund world, make sure to check out www.zacks.com/funds/mutual-funds. There, you can see more about the ranking process, and dive even deeper into FBIOX too for additional information. Want to learn even more? We have a full suite of tools on stocks that you can use to find the best choices for your portfolio too, no matter what kind of investor you are.

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This article originally published on Zacks Investment Research (zacks.com).

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