Is Fidelity Select Health Care (FSPHX) a Strong Mutual Fund Pick Right Now?

Looking for a solid health sector fund? Fidelity Select Health Care (FSPHX) might deserve your attention. With a Zacks Mutual Fund Rank of 1 (Strong Buy), it's certainly caught my eye - though I'm always skeptical of such confident ratings.

FSPHX operates in the healthcare sector, one of America's economic powerhouses. The fund casts a wide net across the industry - from profit-hungry hospitals to pharmaceutical giants and medical device makers. Since its July 1981 debut, FSPHX has accumulated over $7.05 billion in assets under Edward Yoon's management (he's been at the helm since October 2008).

Performance-wise, the numbers aren't exactly thrilling. The 5-year annualized return sits at 7.22%, landing it merely in the middle third among peers. The 3-year return of 5.2% tells a similar mediocre story. I can't help wondering if the "Strong Buy" rating is truly justified with such average performance.

One bright spot: FSPHX shows lower volatility than its category average. Over three years, its standard deviation is 15.05% versus the category's 17.18%. The five-year comparison shows a similar pattern (16.73% vs. 17.75%). So at least it won't give you as many heart palpitations as some alternatives.

The risk metrics reveal some concerns. With a beta of 0.73, it's less volatile than the market, but the negative alpha of -3.76 indicates the managers struggle to beat benchmark returns. Not exactly inspiring confidence in the management team.

Where FSPHX truly shines is cost efficiency. As a no-load fund with a 0.63% expense ratio (compared to the category average of 1.11%), it's significantly cheaper than peers. No minimum initial investment requirement makes it accessible to all investors.

The bottom line? FSPHX presents a mixed picture. The high Zacks ranking and lower fees are appealing, but the middling performance and negative alpha give me pause. If you're bullish on healthcare and prioritize lower volatility and costs, it might be worth considering - but I'd certainly do deeper research before jumping in.