Sector Mutual Funds That Could Outperform in the Second Quarter

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Sector Mutual Funds That Could Outperform in the Second Quarter

Justin Kuepper Apr 27, 2016

Below, takes a look at some key trends to watch in the second quarter and mutual funds that investors may want to consider.

Energy & Materials

Asset Class Performance

The Fidelity Select Materials Portfolio (FSDPX) is a great option for those looking for exposure to materials. The fund has about $1.4 billion in assets under management and a 0.8% expense ratio. Some of the fund’s largest holdings include chemical companies like Dupont de Nemours & Co. (DD) and Eastman Chemical Co. (EMN). Over the past 52 weeks, the fund has fallen more than 9%, but it has since rebounded to return about 3.8% year to date.

Investors considering these mutual funds should be aware of the significantly higher risk. With OPEC controlling a huge chunk of oil supply, energy mutual funds are subject to unpredictable volatility and could see more downside before any upside. Further, commodities have been increasingly influenced by Chinese trading and consumption, which means that their prices could similarly depend on the country’s rebounding economy and could move lower before going higher.

Going Global

Valuation Comparisons Chart

Another popular option is the Fidelity Emerging Markets Fund (FEMKX), which has over $3 billion in assets under management and a 1.05% expense ratio. In this fund, investors have exposure to emerging and developed markets with a focus on India, China, and the United States, which could help reduce volatility compared to other pure plays. The fund also offers a high level of currency diversification to offset the impact on the dollar.

As with the domestic energy and materials sectors, emerging markets represent a riskier bet on a recovery in the global economy.

The Bottom Line

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