Is Fidelity Small Cap Discovery Fund (FSCRX) a Strong Mutual Fund Pick Right Now?

If you're looking for a Small Cap Growth fund category, then a potential option is Fidelity Small Cap Discovery Fund (FSCRX). FSCRX has a Zacks Mutual Fund Rank of 3 (Hold), which is based on various forecasting factors like size, cost, and past performance.

Objective

FSCRX is part of the Small Cap Growth category, and this segment boasts an array of many other possible options. Small Cap Growth mutual funds usually focus their portfolios on stocks with large growth opportunities and a market cap of under $2 billion. These portfolios tend to feature small companies in up-and-coming industries and markets.

History of Fund/Manager

Fidelity is based in Boston, MA, and is the manager of FSCRX. The Fidelity Small Cap Discovery Fund made its debut in January of 2001 and FSCRX has managed to accumulate roughly $2.73 billion in assets, as of the most recently available information. Derek Janssen is the fund's current manager and has held that role since March of 2016.

Performance

Obviously, what investors are looking for in these funds is strong performance relative to their peers. This fund in particular has delivered a 5-year annualized total return of 11.06%, and is in the top third among its category peers. But if you are looking for a shorter time frame, it is also worth looking at its 3-year annualized total return of 8.89%, which places it in the top third during this time-frame.

It is important to note that the product's returns may not reflect all its expenses. Any fees not reflected would lower the returns. Total returns do not reflect the fund's [%] sale charge. If sales charges were included, total returns would have been lower.

When looking at a fund's performance, it is also important to note the standard deviation of the returns. The lower the standard deviation, the less volatility the fund experiences. FSCRX's standard deviation over the past three years is 20.05% compared to the category average of 20.58%. Over the past 5 years, the standard deviation of the fund is 24.52% compared to the category average of 23.48%. This makes the fund more volatile than its peers over the past half-decade.

Risk Factors

With a 5-year beta of 1.21, the fund is likely to be more volatile than the market average. Alpha is an additional metric to take into consideration, since it represents a portfolio's performance on a risk-adjusted basis relative to a benchmark, which in this case, is the S&P 500. FSCRX has generated a negative alpha over the past five years of -4.57, demonstrating that managers in this portfolio find it difficult to pick securities that generate better-than-benchmark returns.

Holdings

Investigating the equity holdings of a mutual fund is also a valuable exercise. This can show us how the manager is applying their stated methodology, as well as if there are any inherent biases in their approach. For this particular fund, the focus is primarily on equities that are traded in the United States.

This fund is currently holding about 77.83% in stocks, which have an average market capitalization of $4.64 billion. The fund has the heaviest exposure to the following market sectors:

• Industrial Cyclical
• Retail Trade
• Finance
• Services

This fund's turnover is about 27%, so the fund managers are making fewer trades than its comparable peers.

Expenses

Costs are increasingly important for mutual fund investing, and particularly as competition heats up in this market. And all things being equal, a lower cost product will outperform its otherwise identical counterpart, so taking a closer look at these metrics is key for investors. In terms of fees, FSCRX is a no load fund. It has an expense ratio of 1.12% compared to the category average of 1.01%. Looking at the fund from a cost perspective, FSCRX is actually more expensive than its peers.

Investors need to be aware that with this product, the minimum initial investment is $0; each subsequent investment has no minimum amount.

Fees charged by investment advisors have not been taken into considiration. Returns would be less if those were included.

Bottom Line

Overall, even with its comparatively strong performance, average downside risk, and higher fees, Fidelity Small Cap Discovery Fund (FSCRX) has a neutral Zacks Mutual Fund rank, and therefore looks a somewhat average choice for investors right now.

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