Fidelity 'Sector' Fund Plies Many Fields

Source from:  Tuesday March 25, biz.yahoo.com aul Katzeff  03/26/2008

What do you call a fund that invests in fields as diverse as health care, tobacco, beer, department stores, cosmetics and farm fertilizers? And how about if 24% of its money is at work in foreign stocks? To those sifting through its holdings, such a portfolio is liable to look a lot like any other large-cap blend fund. And that's how Morningstar categorizes Fidelity Select Consumer Staples (NASDAQ:FDFAX - News) -- as a diversified fund plying many industries, not as a sector fund. The $719 million portfolio held 74 stocks as of Jan. 31. But if you think the troubles besetting the economy and consumers condemn this fund to below-average performance, think again. The fund was down 2.46% so far this year going into Tuesday. But that was better than its large-cap blend rivals tracked by Morningstar. They averaged an 8.34% loss. The S&P 500 was down 7.61%. How has fund manager Robert Lee limited the carnage? "I try to focus on businesses that make products where consumers aren't that price sensitive," he said. "I've also tried to expose myself more to consumer spending outside the U.S." And the fund has shone longer term. In the past three years, Consumer Staples produced an average annual return of 14.79% vs. 4.58% for its peers and 6.85% for the S&P 500. ADRs of Nestle (Other OTC:NSRGF.PK - News), a top holding in the fund's latest disclosure, on March 13 gapped up nearly 8% out of a basing pattern in heavy volume. On Thursday, the world's largest food company had raised its sales forecast for the year, citing strong demand and pricing. The company also said a good early Easter season and extra day in February were boosting its first quarter. The ADRs are up about 7% so far this year and 12% for the past six months. Wal-Mart Stores (NYSE:WMT - News), another top holding, is also another sort of giant. The world's largest retailer is up about 13% this year and 22% for the past six months. Earnings per share grew 6%, 11% and 13% the past three quarters. Annual return on equity has held around 21% and 22% since 2001. On Friday, the company said its $4 generic prescription drug program had saved more than $1 billion for customers since its start. Drugs Deliver Wal-Mart began to offer a $4 charge for a one-month supply of many generics in late 2006. The $4 prescriptions now account for about 40% of all filled prescriptions at Wal-Mart. British American Tobacco (AMEX:BTI - News), yet another top holding, sold off with the rest of the market, starting in mid-January. It climbed back above its 10-week moving average line on Feb. 26. But it gapped back below it on Tuesday, after BAT said it will split its European unit in two. Feb. 26 was when it announced that 2007 EPS rose more than 14% vs. '06. It also announced its second corporate takeover in a week. Further, BAT said it was starting a five-year, cost-cutting program. The U.K.-based tobacco firm is aiming for $1.6 billion in annual savings by 2012. The company encourages investors to look at it as a safe haven. Coca-Cola (NYSE:KO - News) is boosting spending on marketing and product launches, Chief Executive Neville Isdell told India's Economic Times newspaper on Friday. U.S. sales of carbonated soft drinks fell 2.3% in 2007. That was faster than sales declines in '06 and '05, trade publication Beverage Digest said two weeks ago. Coke has fought back with takeovers of noncarbonated-drink makers. Coke sold off with the overall market in January. Then it consolidated for nearly two months. Now the stock is back above its 50-day moving average. It's about flat for the year and up more than 8% in the past six months. The fund's real pop this year in terms of performance has been Coca-Cola Femsa (NYSE:KOF - News). The Mexico-based company bottles Coke-brand drinks in nine Latin American nations. Economies and populations are still growing in that region. The stock has risen 18% this year and is up 44% for the past six months. It's also near its all-time high and carries an IBD Composite Rating of 84. Enditem