All distributions and dividends are assumed to be reinvested, which has no meaningful effect on the rates and percentages shown. For comparison, the same period returns of the Vanguard Index 500 Fund (symbol VFINX), whose performance is close to the S&P 500 index, are also shown.
It should not be assumed that trades in the future following the Fidelity
Select Switching System will be profitable or will equal the performance of
the trades shown below.
Note: Buy prices marked by a * have been adjusted for a distribution by the fund between the purchase and sale dates. This distribution is assumed to be reinvested in the fund, which has no meaningful effect on the percent changes or overall rates of return shown. Fidelity normally makes any distributions for the Selects on the first two Fridays in April and on the first three Fridays in December. Sell or Index Buy Fund Sale/Exchange Buy Recent Percent 500 Date Purchased Date Exchange to: Price Price Change Change 1/5/09 Air Transport 2/9/09 Natural Gas 27.12 22.67 -16.4% -3.7% 1/12/09 Energy Service 3/2/09 Money Market 36.23 30.87 -14.8% -19.1% 1/20/09 Chemicals 3/2/09 Money Market 45.45 40.11 -11.7% -12.6% 1/26/09 Money Market 3/23/09 Automotive 1.00 1.00 0.15% -9.4% (Interest earned) 2/2/09 Medical Equip. 3/16/09 Banking 19.36 17.54 -9.4% -8.2% 2/9/09 Natural Gas 3/16/09 Banking 22.91 19.27 -15.9% -13.0% 2/17/09 Brokerage 3/23/09 Automotive 29.22 29.18 -0.1% 4.6% 2/23/09 Telecomm 4/20/09 Automotive 25.99 30.38 16.9% 12.4% 3/2/09 Money Market 4/6/09 Automotive 1.00 1.00 0.10% 19.5% (Interest earned) 3/9/09 Money Market 4/13/09 Automotive 1.00 1.00 0.10% 27.1% (Interest earned) 3/16/09 Banking 6/1/09 Networking 9.16* 12.92 41.1% 25.7% 3/23/09 Automotive 9/21/09 Energy Service 12.64* 28.54 125.8% 30.9% 3/30/09 Automotive 9/21/09 Energy Service 11.98* 28.54 138.2% 36.7% 4/6/09 Automotive 9/21/09 Energy Service 14.99* 28.54 90.4% 28.8% 4/13/09 Automotive 9/21/09 Energy Service 16.11* 28.54 77.1% 25.3% 4/20/09 Automotive 9/21/09 Energy Service 15.77 28.54 81.0% 29.2% 4/27/09 Paper & Forest 6/15/09 Automotive 18.72 19.93 6.5% 8.2% See comment below 5/4/09 Paper & Forest 6/15/09 Automotive 20.88 19.93 -4.5% 2.2% about closing of 5/11/09 Paper & Forest 6/15/09 Automotive 20.37 19.93 -2.2% 1.9% this fund 5/18/09 Medical Delivery 7/13/09 Money Market 31.92 32.66 2.3% -0.6% 5/26/09 Financial Serv. 7/6/09 Medical Delivery 48.86 47.90 -2.0% -1.0% 6/1/09 Networking 6/15/09 Automotive 1.90 1.88 -1.1% -1.9% Fund also closed 6/8/09 Automotive 9/21/09 Energy Service 21.95 28.54 30.0% 14.1% 6/15/09 Automotive 9/21/09 Energy Service 21.51 28.54 32.7% 15.9% 6/22/09 Biotechnology 8/10/09 Automotive 58.15 63.68 9.5% 13.0% 6/29/09 Medical Equipment 8/3/09 Automotive 21.06 21.89 3.9% 8.3% 7/6/09 Medical Delivery 8/10/09 Automotive 32.28 36.19 12.1% 12.3% 7/13/09 Money Market 8/17/09 Banking 1.00 1.00 0.10% 9.0% (Interest earned) 7/20/09 Electronics 9/14/09 Air Transport 34.07 38.19 12.1% 10.7% 7/27/09 Automotive 9/21/09 Energy Service 26.50 28.54 7.7% 8.8% 8/3/09 Automotive 9/21/09 Energy Service 29.24 28.54 -2.4% 6.5% 8/10/09 Automotive 9/21/09 Energy Service 29.35 28.54 -2.8% 6.0% 8/17/09 Banking 10/5/09 Consumer Staples 14.43 15.29 6.0% 6.5% 8/24/09 Banking 10/5/09 Consumer Staples 14.98 15.29 2.1% 1.6% 8/31/09 Electronics 10/5/09 Consumer Staples 36.92 36.62 -0.8% 2.1% 9/8/09 Air Transport 10/26/09 Automotive 27.44 26.93 -1.9% 4.2% 9/14/09 Air Transport 10/26/09 Automotive 29.31 26.93 -8.1% 1.8% 9/21/09 Energy Service 11/16/09 Medical Delivery 56.86 59.69 5.0% 4.5% 9/28/09 Natural Gas 11/9/09 Medical Delivery 31.09 31.61 1.7% 9.2% 10/5/09 Consumer Staples 11/30/09 Pharmaceuticals 59.07 61.44 4.0% 5.7% 10/12/09 Natural Resources 11/16/09 Medical Delivery 28.65 28.70 0.2% 3.3% 10/19/09 Energy 11/23/09 Automotive 46.70 42.42 -9.2% 1.0% 10/26/09 Automotive 12/7/09 Air Transport 30.40 30.45 0.2% 3.7% 11/2/09 Money Market 12/7/09 Air Transport 1.00 1.00 0.10% 6.1% (Interest earned) 11/9/09 Medical Delivery 1/4/10 Natural Gas 40.66 44.07 8.4% 4.0% 11/16/09 Medical Delivery 1/4/10 Natural Gas 40.64 44.07 8.4% 2.4% 11/23/09 Automotive 2/1/10 Money Market 30.00 31.53 5.1% -1.2% 11/30/09 Pharmaceuticals 1/4/10 Natural Gas 10.60* 11.05 4.3% 3.6% 12/7/09 Air Transport 4/12/10 Home Finance 30.74 39.45 28.3% 9.2% 12/14/09 Air Transport 4/12/10 Home Finance 31.74 39.45 24.3% 8.0% 12/21/09 Air Transport 4/12/10 Home Finance 31.89 39.45 23.7% 8.0% 12/28/09 Natural Gas 2/16/10 Constr & Housing 32.48 31.79 -2.1% -2.7% Money Market fund assumed to earn interest at a 1.00% annual rate.In order to keep this complicated page from becoming even more so, the trade results shown do NOT include the use of "stop-loss" tactics, which is my recommended strategy. These are discussed in several other pages on this site, and there are some examples that illustrate the potential beneficial effects of using stop-losses. The more volatile sector funds such as those in high technology, Biotechnology, and Energy Service are more likely to get stopped out. In many such cases, the fund likely would have been held less than 30 days. If so, it would have been hit with Fidelity's 0.75% short-term selling penalty for Select funds.
Since it is unlikely that any investor would act on all of the weekly signals shown above and on the linked pages for prior years, here is an illustration of one use of the weekly trade list tables.
Starting on 12/29/08, the closest Monday to the start of 2009, if one had invested into a single Select fund and followed the system, these would be the trades: Buy Fund Sale/Exchange Percent Index 500 Date Purchased Date Exchange to: Change Change 12/29/08 Natural Gas 3/2/09 Money Market -10.9% -18.9% 3/2/09 Money Market 4/6/09 Automotive 0.10% 19.5% 4/6/09 Automotive 9/21/09 Energy Service 90.4% 28.8% 9/21/09 Energy Service 11/16/09 Medical Delivery 5.0% 4.5% 11/16/09 Medical Delivery Still held as of 12/28/09 8.0% 1.9% -------------------------------------------------------------------- Total return as of 12/28/09 92.5% 32.9% accounting for maximum 2% annual management fee 90.5% The calculation for the total return for the track is: (0.891)(1.0010)(1.904)(1.050)(1.080) - 1 expressed as a percent.Here is a table showing what have happened if one had followed the method illustrated above starting on the closest "Monday" to the beginning of each year since 1996. The returns shown are those for the following year (52 weeks). "Selects System" shows the results of trading the Select funds, which have been reduced by the maximum 2% annual management fee. Those returns do not reflect Fidelity's load (removed in September 2003) applied to initial purchases of Select funds, which ranged from 0% to 3% depending on the amount of the purchase. The links in the right column show the weekly trades for each year and the computations of the values in the table. Returns for the Vanguard Index 500 fund are included to provide a market condition context.
Year Selects System Index 500 Weekly Trade Lists & Computations 1996 31.2% 21.9% 1996 Weekly Trade List 1997 33.1% 28.6% 1997 Weekly Trade List 1998 17.1% 27.7% 1998 Weekly Trade List 1999 56.4% 19.6% 1999 Weekly Trade List 2000 32.0% -10.8% 2000 Weekly Trade List 2001 -20.5% - 9.5% 2001 Weekly Trade List 2002 -23.8% -21.3% 2002 Weekly Trade List 2003 18.4% 28.2% 2003 Weekly Trade List 2004 14.7% 8.8% 2004 Weekly Trade List 2005 12.5% 7.4% 2005 Weekly Trade List 2006 12.8% 13.6% 2006 Weekly Trade List 2007 11.2% 6.9% 2007 Weekly Trade List 2008 -42.4% -38.4% 2008 Weekly Trade List ------ ------ Average(96-08) 11.8% 6.4%
No claim is made that the system will perform in the future as it has in the past or as illustrated above. Also, there can be no assurances that the system will produce a profit in the future; it is possible that the system will produce losses.
December 28, 2009:
The "year" 2009 (actually the 52 weeks from 12/29/08 to 12/28/09) is now complete, so we can take our annual look at how the method did. The track shown above had five trades, the last one still open although it is six weeks in duration at this point. I expect 5-7 trades a year, so this year was at the low end of that range. The main reason for the low number of trades was the one in Automotive that lasted five and a half months.
The one in Automotive was an exceptional trade by far that resulted in the track greatly outperforming the broad market, which after falling sharply for the first two months of the year ended up with a gain of over 30% as measured by the Vanguard index fund. In short, stocks had a great year, and the system, which is expected to do well in strong markets, had huge gains because it traded in a fund that more than doubled in a short period of time.
Three of the other four trades also did better than the index fund over their periods. The first one, in Natural Gas, did so in a painful way by falling a lot less than the broad market. Trading sector funds in weak markets is quite risky, as that trade illustrates. The only "bad" trade was the one in money market that began almost right at the bottom of the market, so the system missed the beginning of the rebound from the bottom. However, had the market continued to fall, and it is quite difficult to identify market bottoms (and tops for that matter) until well after they have taken place, being out of stocks would have seemed quite wise. On the other hand, being in cash for the minimum five weeks as part of the system gave Automotive time to move to the top of the rankings, and that trade more than made up for missing the start of the recovery in stocks.
Because the closest market Monday to the start of 2010 is January 4, the track for 2010 will start next week.
September 21, 2009:
The amazing trades in Automotive have finally come to an end. The earliest two more than doubled and the ones starting the next three weeks all gained more than 75%. Although there have been some huge winners in the past, particularly in the last half of the 1990s during the secular bull market that ended in early 2000, nothing has come close to this one. A couple more signaled in June also did quite well although they were not spectacular. The last three in late July and early August trailed the broad market, and the last two suffered small losses. Being top-ranked for three distinct periods during a trade is highly unusual, and that description applies to just about all facets of the Automotive trades.
Back in late March, a couple of weeks after the broad market had bottomed out--which was not at all apparent at the time, who would have thought that particular sector would be poised to explode? When hearing the name Automotive, one first thinks of the no longer so big "Big Three": GM, Ford, and Chrysler. Two them were bankrupt and needed a federal bailout. However, Fidelity's managers deserve credit for concentrating on makers of parts. The annual report shows that at the end of February, 16.2% of the portfolio was in auto manufactures. About 30% of that was Ford stock, so the remainder was foreign firms, and there were no holdings of GM (or Chrysler, which was privately held). At the end of June, Ford was not one of the ten largest holdings of the fund.
The fund has more than tripled since its low point in early March, before it was signaled for purchase. As impressive at that sounds, the fund is still under half of what it was not quite two years ago in October 2007. The broad market has shown similar, but less dramatic, behavior. Although the Dow is up about 50% from its March lows, it is still well below where it was a year ago.
July 6-13, 2009:
Medical Delivery was signaled for selling on July 6 by the system, but that fund was also the top-ranked one at the time. That happens every so often and is a result of using different look back periods to do the rankings for buying and for selling. In a case like this, the fund is held for another week and evaluated then. In this case, it was still a sell, but was no longer top-ranked. The table above shows it being exchanged into Money Market on July 13.
If Medical Delivery was purchased on July 6, those shares were not sold on July 13 because the system has a five week minimum holding period, which is designed to avoid the 0.75% charge Fidelity imposes for selling a Select fund within 30 days of purchasing it. Although the money market fund is not subject to the charge, the system treats it like the other Select funds and holds it for at least five weeks.
May 26 - June 1, 2009:
As a follow up to the prior comment about the closing of Paper and Forest Products, Fidelity's latest annual report for the fund says that on or about June 19, it will cease to exist and will be merged into Select Materials. I think that decision is based on the low level of assets in Paper and Forest and its relatively poor performance over the last several years as reflected in its one-star Morningstar rating.
If the trading system calls for continued ownership at that time, because June 19 is a Friday and the system assumes trading on Mondays, the table above will show the sale Paper and Forest on Monday June 15 and the purchase of the top- ranked fund based on the rankings as of June 12.
These comments also apply to Select Networking and Infrastucture, which is being closed and merged into Communications Equipment. This fund likely should not be purchased at this point.
April 27 - May 11, 2009:
The top-ranked fund these weeks, Paper and Forest Products, is currently closed to new investors. Those who own the fund in any account anywhere, not necessarily directly with Fidelity, can purchase this fund. Because no fund is to be sold these weeks, those in the system and following it are not affected by FSPFX being closed. Those looking to make a new investment might consider the second ranked fund, Automotive in each of the weeks. However, since that fund had been the top-ranked one for the five weeks before Paper and Forest and has moved up considerably, I would hesitate before buying it now. Five consecutive top rankings has happened before, but not enough times to draw any meaningful information from how those funds have done. What is likely the best course of action with new money to be invested using the system is to wait until another Select fund (and I don't think any of the others are closed now) rises to the top of my rankings.
March 23, 2009:
Although the 0.75% charge for selling a Select fund before holding it for 30 days does not apply to the money market fund, the system treats that fund like the other Selects. This week two funds, Brokerage being the other one, are signaled for selling. There are a couple of ways this can be handled if one does not want to have all the assets in a single sector fund. Those are discussed in the comments for prior years. This week, the easiest way is to just exchange Brokerage into Automotive and leave the Money Market holdings alone. If the market continues to rise and one wishes to become (more) fully invested, then in the next week or two, Money Market can be exchanged into a Select fund not highly correlated with Automotive.
March 2, 2009:
Stock prices continued to drop sharply in the first two months of the year in a scary continuation of last year's second half plunge. Sector funds have fallen along with the general market with some of Selects falling even more than the broad market and others less. Because sector funds tend to be quite volatile, they are especially risky in highly unsettled markets like what we have been seeing for the last six months or so. The only "good" way to trade them in such conditions is not to trade them. My managed Selects accounts have been in cash since last June. Although the money market has not paid very much due to the plunge in short-term rates, a small amount of income beats substantial losses by a large margin.
This week saw the unprecedented event of four Select funds being signaled for sale at the same time. On prior year pages, I have discussed the choices when two funds have sell signals the same week, which typically happens a few times a year. In the current case, I think the proper course is obvious. Since the Money Market is again at the top of the rankings, I would recommend moving all of the sale proceeds into cash. Although it is not subject to the 0.75% charge for selling a Select within 30 days of purchase, I treat the money market fund like the others and have a five week minimum holding period for it. When the system signals selling it, one could start phasing back into stocks depending on whether it looks like stocks have made a meaningful bottom and one's level of aggressiveness. If more than one Select fund is to be held at a time, it may take two or more weeks before the requisite number of not highly correlated Selects rise to the top of the rankings.
This week also sees the end of the first trade in the track for this year. Natural Gas had, been holding up well, and the trade was profitable until about two weeks ago. However, that fund dropped sharply in the last two weeks like most of the market. The only "good" aspect of the trade is that the fund fell by quite a bit less than the index fund that is used to represent the broad market. Unfortunately, too much of that type of "good" news can do severe damage to one's finances and the ability to achieve longer term goals. Being out of the market when stocks are in a clear trend down is a much better way to go.
Go to Implementation Issues