Fidelity Select Consumer Finance Makes a Comeback
When the stock market crumbled in 2008, financials led the way down. The sector plunged 55% that year, compared with a 37% loss for Standard & Poor’s 500-stock index. Fidelity Select Home Finance was loaded with companies at the epicenter of the financial crisis, such as Fannie Mae and Freddie Mac, and plummeted 59%. But the fund, now called Fidelity Select Consumer Finance> (symbol FSVLX), switched gears after the Great Recession ended in 2009; it revamped its holdings and climbed to the top of the one-year performance leaders among financial sector funds (along with two other Fidelity funds).
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Manager Shilpa Mehra, who took the helm in 2012, says that an emphasis on credit card companies, which facilitate the “electronification” of global payments, boosted performance. Indeed, Visa and MasterCard were the fund’s biggest holdings at last report. Also aiding results were stocks of companies that benefit from low interest rates, such as Ocwen Financial and Altisource Portfolio Solutions, which provide services to the real estate industry. The fund has one-third of its assets in commercial bank stocks.
Mehra says she likes companies that she thinks will generate sustainable long-term profit growth, as well as firms whose stocks may be mispriced because of short-term concerns. Select Consumer Finance holds about 50 stocks, with roughly half of the fund’s $308 million in assets invested in its top ten holdings.