Though the name suggests the sector focused mutual funds can regularly include health care and tech stocks, many of the top performers this year have shined by including consumer discretionary and international tech stocks along with AAPL and GOOGL.
Fidelity Select Technology Portfolio (FSPTX) was the best performer of the mutual fund peer group, climbing 28%. In addition to the aforementioned U.S. tech heavyweights, manager Charlie Chai holds stakes of automaker Tesla (TSLA) and Chinese e-commerce company JD.com (JD) within its top-10 holdings. FSPTX’s 0.77% net expense ratio, below the 1.4% peer average, along with our holdings analysis helps support the five star ranking from CFRA.
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Another strong performer is BlackRock Science & Technology Opportunity Portfolio (BGSAX), which rose 25% year to date.. Despite its name, BDSAX has no exposure to health care stocks, but similar to FSPTX has been aided in 2017 due to its inclusion of consumer discretionary stocks, such as Amazon.com (AMZN) and international tech stocks, including Alibaba Group (BABA) and Tencent Holdings.
The above ETFs track a U.S.-focused index and as such the asset managers do not have the flexibility to include Internet retailers or Asian technology companies. While these investments have been rewarding in 2017, they might not always be. Indeed, the average science and technology mutual fund lagged VGT and XLK in 2015 and 2016. A good reminder that past performance is not necessarily indicative of future results.
Todd Rosenbluth is Director of ETF & Mutual Fund Research at CFRA.