Fidelity Select Healthcare (FSPHX) is among the latest additions to the model portfolio maintained by Jim Lowell to his Fidelity Investor. Here's the reasoning behind this "defensive" fund selection.
"I remain bullish long-term, both with regard to the global economy and markets and with specific regard to our own. But, I also remain cautious about any immediate solution to solve what could be even more meddlesome underlying issues with regard to our economy and markets.
"Today's potential for 'recession' now looks more highly correlated to the 1989-1991 recession; driven largely by a speculative housing bubble and the S&L and Equity Line selling frenzy. We're prepared.
"Meanwhile, we have added Fidelity Select Healthcare to our portfolio. Select Healthcare is managed by Matt Sabel. Matt has done what few other recent managers of this fund have been able to do – he's outperformed his
benchmark MSCI US IM Health Care index since taking over the fund in August 2006.
"Granted, that's not a long timeline, but in light of this fund's role in our portfolios (a defensive one), we'll accept it
as promising. Unlike most healthcare funds which can have as much as 1/3rd or more of their holdings in foreign healthcare companies, Sabel takes a multinational (i.e., US company) view (foreign stocks represent 9% of the
fund's assets).
"The fund is well diversified among major pharmas, medical equipment, HMOs and biotech. Healthcare fared well during the last financial/home-related recession (1989-1990), as well as the most recent recession (2002-2002), which lends argument to owning this fund here and now."
Each day, Steven Halpern's TheStockAdvisors.com offers the latest market commentary and favorite investment ideas from the nation's leading financial newsletter advisors.
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