The Other Sector ETF Player

The world of sector exchange traded funds is largely dominated by State Street Global Advisors (SSgA) and Vanguard, but other players have decent footprints in the space. That includes mutual fund Fidelity.

Massachusetts-based Fidelity joined the sector ETF fray 2 1/2 years ago  with 10 funds, which at the time were the least expensive sector ETFs on the market. Fidelity has since added an 11th sector fund, the Fidelity MSCI Real Estate ETF FREL while Vanguard has since reclaimed the title of issuer of the least expensive sector ETFs.

Fidelity's ascent in the crowded sector ETF arena is notable, particularly when considering the issuer's late entry.

Crashing The Party

"Fidelity crashed the sector ETF party two-and-a-half years ago with the rollout of its passively MSCI-based index lineup tied to the 10 GICS sectors. More than a year later they added a REIT product in advance of the pending addition of a new sector in mid-2016. Combined these 11 products have approximately $2.4 billion in assets and in many cases the ETFs rank favorably due in part to their appealing holdings and modest 0.12% expense ratios," said S&P Capital IQ in a recent note.

With nearly $574 million in assets under management, the Fidelity MSCI Health Care Index ETF FHLC is the firm's largest sector fund. FHLC holds such venerable healthcare names as Dow components Johnson & Johnson JNJ and Pfizer Inc. PFE.

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Although it is one of Fidelity's smaller sector ETFs with just over $135 million in assets, the Fidelity MSCI Telecommunication Services Index ETF FCOM is the best performer from the firm's sector suite with a year-to-date gain of 9.1 percent. FCOM, which hit an all-time last Friday, allocates a massive percentage of its weight to Verizon Communications Inc. VZ and AT&T Inc. T.

With $294.4 million in assets, the Fidelity MSCI Energy Index ETF FENY is the firm's third-largest sector ETF.

"The energy sector has been a drag on S&P 500 earnings in 2015 and it losses should persist until the fourth quarter of 2016 according to Capital IQ consensus forecasts. However, the downstream operations of integrated oil & gas companies (44% of FENY's assets) are profitable according to S&P Global Market Intelligence equity analyst Stewart Glickman. Further, he sees the relatively low-leverage balance sheets of CVX, SLB and XOM as providing financial flexibility. Bentek Energy, which like S&P Global Market Intelligence is part of McGraw-Hill Financial, forecasts an average of $36 per barrel for WTI crude oil, up from current $33," said S&P Capital IQ.

Disclosure: The author owns shares of JNJ.