“Today, we exit Communications Equipment (FSDCX),” Dion said in his weekly commentary. “This fund of telecom and internet networking stocks has lost ground on the momentum ranking table in recent weeks as investors began shifting out of technology and into healthcare-related funds,” Dion noted, adding that “concern over earnings is driving this reallocation.”
John Chambers, Chief Executive of top FSDCX holding Cisco Systems, noted in an interview earlier this month that the U.S. may not see an economic recovery until 2009. Cisco, which makes the routers and hubs over which much of the Internet’s traffic travels, is a bellwether for the computer networking sector, and many analysts viewed Chambers’ comments as an indication that profit margins will remain narrow across that industry in the second half. Shares of Cisco, which accounts for 19.13 percent of this fund’s net assets, are down 17.1 percent since the beginning of the year. http://www.fidelityadviser.com/
“Medical Equipment and Systems (FSMEX) enters our Portfolio today,” Dion announced. “Medtronic, this fund’s top stock (16.49 percent of net assets), has weathered a number of storms in recent months—the Food and Drug Administration ordered the company’s Physio-Control subsidiary to stop shipping external defibrillators after discovering manufacturing and quality problems—but investors appear to believe the medical device maker is back on track,” Dion advised.
Medtronic’s stock has rallied 6.6 percent since hitting a low in mid-May. Together with Medtronic, Baxter International, a diverse company with extensive pharmacological and biotech operations, and Covidien account for 45.61 percent of FSMEX’ net assets.
“Health care funds topped the momentum rankings from last week,” Dion said, “and Pharmaceuticals (FPHAX) was the biggest gainer thanks to solid quarterly earnings from Johnson & Johnson.” Dion believes that with competition from generic drugs heating up, “pharmaceutical companies with large, cash-producing consumer products divisions, such as Johnson & Johnson will outperform their peers.”
Despite J&J’s good news, some pharma stocks struggled last week. Investors dumped shares of Merck and Schering-Plough—
“While pharma news wasn’t good across the board,” Dion said, “stocks like J&J, with a developed consumer unit, may make FPHAX a good investment.”
Fidelity Independent Adviser’s Sector Momentum Tracker uses a time-tested formula to calculate relative strength. The Sector Portfolio has returned 29.73% net of fees since its inception in June 2004. http://store.fidelityindependentadviser.com/
Fidelity Independent Adviser has more than 70,000 subscribers in the United States and 29 other countries, and publishes four monthly newsletters and three weekly newsletters. Its flagship publication, Fidelity Independent Adviser, has been published monthly for 11 years and reaches 40,000 subscribers.
For information and subscription offers, go to http://store.fidelityindependentadviser.com/
Publisher Don Dion is also president and founder of Dion Money Management, a fee-based investment advisory firm to affluent individuals, families and nonprofit organizations, where he is responsible for setting investment policy, creating custom portfolios and overseeing the performance of client accounts. Founded in 1996 and based in Williamstown, Massachusetts, Dion Money Management manages more than $700 million in assets for clients in 49 states and 11 countries. A licensed attorney in Massachusetts and Maine, Mr. Dion has more than 25 years’ experience working in the financial markets, having founded and run two publicly traded companies before establishing Dion Money Management.
For more information, or a Free Portfolio Review, go to http://www.dionmm.com/
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Fidelity Independent Adviser's newsletters offer a broad range of investors Don’s commentary on the financial markets, with a specific emphasis on mutual funds and exchange-traded funds