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Sector Rotation Fidelity Select Funds
This strategy is a sector rotation strategy using Fidelity Select Funds representing U.S. industries.
This strategy is based on a well known (and popular) investment strategy: price momentum based industry sector rotation. At the end of each month, the candidate industry sector funds are scored based on its past price performance. In this strategy, a scoring system similar to FundX is used. The top four funds are chosen to be invested for the coming month. This process is repeated at the end of each month.
This strategy is an application of the general momentum strategy Momentum Based on FundX Scoring to the Fidelity Select funds. Because the sector rotation of Fidelity Select funds has been widely followed, we treated this as a stand alone strategy.
This strategy could result in a wide fluctuation but produces sometimes dramatic returns (also loss too). It could be used for the US equity asset investment with proper allocation based on its risk/return characteristics.
The following is the list of the Fidelity Select Funds used in this strategy. Notice we add corresponding ETF column. Although there have been many ETFs in the market these days, some of them have very thin (less than 100,000) trading volume. Those are marked with *.
| Fund Name | Investment Category |
Inception Date | ETF |
| Fidelity Telecom and Utilities Fund (FIUIX) | Utilities | 11/27/1987 | XLU |
| Select Air Transportation Portfolio (FSAIX) | Cyclicals | 12/16/1985 |
FAA* |
| Select Automotive Portfolio (FSAVX) | Cyclicals | 06/30/1986 | |
| Select Banking Portfolio (FSRBX) | Financials | 06/30/1986 | KBE |
| Select Biotechnology Portfolio (FBIOX) | Health Care | 12/16/1985 | IBB |
| Select Brokerage and Investment Management Portfolio (FSLBX) | Financials | 07/29/1985 | IAI |
| Select Chemicals Portfolio (FSCHX) | Cyclicals | 07/29/1985 | |
| Select Communications Equipment Portfolio (FSDCX) | Technology | 06/29/1990 | IYZ |
| Select Computers Portfolio (FDCPX) | Technology | 07/29/1985 | |
| Select Construction and Housing Portfolio (FSHOX) | Cyclicals | 09/29/1986 | XHB |
| Select Consumer Discretionary Portfolio (FSCPX) | Consumer | 06/29/1990 | XLY |
| Select Consumer Staples Portfolio (FDFAX) | Consumer | 07/29/1985 | XLP |
| Select Defense and Aerospace Portfolio (FSDAX) | Cyclicals | 05/08/1984 | PPA |
| Select Electronics Portfolio (FSELX) | Technology | 07/29/1985 | PHW* |
| Select Energy Portfolio (FSENX) | Natural Resources | 07/14/1981 | XLE |
| Select Energy Service Portfolio (FSESX) | Natural Resources | 12/16/1985 | |
| Select Environmental Portfolio (FSLEX) | Cyclicals | 06/29/1989 | |
| Select Financial Services Portfolio (FIDSX) | Financials | 12/10/1981 | XLF |
| Select Gold Portfolio (FSAGX) | Natural Resources | 12/16/1985 | GDX |
| Select Health Care Portfolio (FSPHX) | Health Care | 07/14/1981 | XLV |
| Select Home Finance Portfolio (FSVLX) | Financials | 12/16/1985 | RKH |
| Select IT Services Portfolio (FBSOX) | Technology | 02/04/1998 | VGT |
| Select Industrial Equipment Portfolio (FSCGX) | Cyclicals | 09/29/1986 | |
| Select Industrials Portfolio (FCYIX) | Cyclicals | 03/03/1997 | XLI |
| Select Insurance Portfolio (FSPCX) | Financials | 12/16/1985 | KIE |
| Select Leisure Portfolio (FDLSX) | Consumer | 05/08/1984 | |
| Select Materials Portfolio (FSDPX) | Cyclicals | 09/29/1986 | XLB |
| Select Medical Delivery Portfolio (FSHCX) | Health Care | 06/30/1986 | IHI* |
| Select Medical Equipment and Systems Portfolio (FSMEX) | Health Care | 04/28/1998 | IHI* |
| Select Money Market Portfolio (FSLXX) | Money Market | 08/30/1985 | |
| Select Multimedia Portfolio (FBMPX) | Consumer | 06/30/1986 | |
| Select Natural Gas Portfolio (FSNGX) | Natural Resources | 04/21/1993 | FCG |
| Select Natural Resources Portfolio (FNARX) | Natural Resources | 03/03/1997 | IGE |
| Select Pharmaceuticals Portfolio (FPHAX) | Health Care | 06/18/2001 | PPH |
| Select Retailing Portfolio (FSRPX) | Consumer | 12/16/1985 | RTH |
| Select Software and Computer Services Portfolio (FSCSX) | Technology | 07/29/1985 | SWH |
| Select Technology Portfolio (FSPTX) | Technology | 07/14/1981 | XLK |
| Select Telecommunications Portfolio (FSTCX) | Utilities | 07/29/1985 | IYZ |
| Select Transportation Portfolio (FSRFX) | Cyclicals | 09/29/1986 | IYT |
| Select Utilities Portfolio (FSUTX) | Utilities | 12/10/1981 | XLU |
| Select Wireless Portfolio (FWRLX) | Utilities | 09/21/2000 | PTE* |
| REIT | IYR | ||
| Agriculture | MOO | ||
| Clean Energy | PBW | ||
| Water | PHO | ||
| Coal | KOL | ||
| Steel | SLX |
Model Portfolios
- Unhedged portfolios: These portfolios have all the above Fidelity Select stock funds as their candidates. They do not invest into Cash even during the severe market downturn. Two portfolios are maintained. One does the rebalancing at the month end while the other does the rebalancing quarterly. Fidelity allows its customers to exchange from one Select fund to the other after 30 days holding period without charging redemption fee. The performance of the quarterly rebalancing portfolio is meaningfully worse than that of the monthly rebalancing portfolio.
- Hedged portfolios: To guard against the dramatic loss during stock market downturns, we use CASH as the alternative for any of the top 3 sectors if that sector's FundX score is lower than the CASH's score in the past one year period. Such a technique has been proved to be an effective way to shelter a portfolio from big loss. These portfolios are named with additional phrase 'with Cash'.
Similar funds and ideas:
- Rydex Sector Rotation (RYSRX)
- ETF Market Opportunity (ETFOX)
- PowerShares Valueline Industry Rotation (PYH)
- Industry Leaders Fund (ILFIX): it uses a patented process to identify industry sector and individual securities weights.
- Claymore/Zacks Sector Rotation (XRO)
- Strategy Momentum Based on FundX Scoring: a FundX style scoring for momentum calculation.
Research and Newsletters
See Also
- Janet Brown: About FundX: http://www.fundx.com/AboutFundX.aspx or FUNDX, RELAX, INCMX in http://fundxfunds.com/
- CXO Advisory: The Noload FundX Mutual Fund Momentum Approach.
- Mark Hulbert. "STRATEGIES: In Search of the Perfect Sector", New York Times, May 2, 1999.