FSCPX or FSRPX: Which Retail Fund Should You Buy? – January 13, 2020

Stocks had a turbulent ride throughout 2019, although the broader S&P 500 ended the year gaining as much as 28.9%, the highest one-year gain since 2013. The retail sector, however, had a decent run. This was a result of healthy economic growth in the first three quarters of 2019.

Decent corporate earnings and three interest rate cuts in July, September and October, helped boost consumers’ purchasing power. Impressive holiday sales last season also added to the retail sector’s growth.

Retail’s Momentum to Continue in 2020

Major players in the sector gained from their brand offerings, initiatives in inventory-management and optimization of supply chain. Brick-and-mortar companies expanded digitally as well, thereby grabbing a chunk of online shoppers. Retailers also extended their loyalty programs and pushed their shipping and delivery capabilities last year.

In fact, the rise in online sales since early November was a vital reason for the striking holiday sales in 2019, according to a report by Adobe Analytics. Overall holiday retail sales, minus autos, rose 3.4%.

Retail major Walmart turned its attention to stylish, upscale products and was more inclusive of plus sizes, all of which boosted sales.

Finally, inventive marketing strategies were also gave a boost to the retail sector. For example, the 1980s consumerism featured in Stranger Things Season 3 led to an increase in show-specific fashion offered by Levi Strauss & Co. and H & M Hennes & Mauritz AB.

Retailers on a Hiring Spree in December

The sector added the highest number of new jobs in December, among others. Out of the total new job additions of 145,000 last month, the retail sector added 41,000 jobs, per the U.S. Bureau of Labor Statistics.

Job additions within the sector were diverse, with new vacancies in clothing and accessories stores (+33,000) and in building material and garden supply stores (+7,000). Both these industries witnessed lower job additions in November.

Picking the Right Retail Fund

Considering the sector’s growth last year and impressive new job additions in its final month, one could consider investing in retail. However, choosing the right mutual funds for one’s portfolio can become cumbersome.

Let us, therefore, take a look at two mutual funds that invest in the retail sector and find out which of these is best suited to your portfolio.

Fidelity Select Consumer Discretionary Portfolio (FSCPX Free Report)

The fund invests the majority of its assets in securities of companies that are engaged in manufacturing and distributing consumer discretionary products and services. The fund aims for capital appreciation and invests in securities of both U.S. and non-U.S. issuers. FSCPX is a non-diversified fund.

This Sector-Other product has a history of positive total returns for over 10 years.  Specifically, the fund’s returns are 14.2% over the 3-year and 10.7% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.

The Fidelity Select Consumer Discretionary Portfolio, as of the last filing, allocates its assets in top two major groups — High Yield Bond and Large Growth. Further, as of the last filing, Amazon, Home Depot and McDonald’s were the top holdings for FSCPX.

FSCPX carries a Zacks Mutual Rank #1 (Strong Buy) andwas incepted on Jun 29, 1990. It carries an expense ratio of 0.78%. The fund requires no minimal initial investment.

Fidelity Select Retailing Portfolio (FSRPX Free Report)

The fund aims for capital growth. FSRPX invests the majority of its assets in securities of companies that merchandise finished goods and services to consumers. The non-diversified fund invests mostly in common stocks and in securities of both U.S. and non-U.S. issuers.

This Sector-Other product has a history of positive total returns for over 10 years.  Specifically, the fund’s returns are 17.9% over the 3-year and 15.7% of the 5-year period. To see how this fund performed compared in its category, and other #1 and #2 Ranked Mutual Funds, please click here.

The Fidelity Select Retailing Portfolio, as of the last filing, allocates its assets in top two major groups — High Yield Bond and Large Value. Further, as of the last filing, Amazon, Home Depot and Lowe’s were the top holdings for FSRPX.

FSRPXcarries a Zacks Mutual Rank #2 (Buy) and was incepted on Dec 16, 1985. It carries an expense ratio of 0.76%. The fund requires no minimal initial investment.

Conclusion

Taking a closer look at FSCPX and FSRPX, we find that despite being a riskier investment, the latter proves to be a better option. FSRPX may carry a Zacks Mutual Rank #2 but the fund has higher returns over the 3- and 5-year periods as compared to FSCPX. FSRPX carries a lower expense ratio as well.

While FSRPX has higher risk associated with it (three-year beta of 1.16 against FSCPX’s 1.15),it offers greater returns. Therefore, investors with a higher appetite for risk must go for FSRPX. This is because the prevalent market conditions are broadly encouraging and one would do well to bet on the fund.

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