Fidelity Sector Funds: Q2 2024 Performance Review

Fidelity Select Materials Portfolio Q2 2024 Review

In the second quarter, the fund's Retail Class shares returned -5.38%, versus the -5.31% return of the sector index, the MSCI U.S. IMI Materials 25/50 Linked Index, and the 4.28% gain of the broad-based S&P 500 index. Investment Approach Fidelity® Select Materials Portfolio is a sector-based equity-focused strategy that seeks to outperform its benchmark through active management. We conduct in-depth fundamental research, supported by Fidelity's deep and experienced global cyclicals team, to develop a differentiated view from consensus on product- and end- market trends. We follow a contrarian investment approach and focus on companies in which we anticipate a positive change in business fundamentals before it is recognized and properly valued in the company's stock price. We also look for reasonably valued stocks of firms with improving returns on capital, healthy free-cash-flow yields, the potential for price-earnings multiple expansion, or defensive-growth characteristics. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 09/29/1986. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year, or estimated amounts for the current fiscal year in the case of a newly launched fund. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit Fidelity Funds | Mutual Funds from Fidelity Investments, Financial Professionals | Fidelity Institutional, or Fidelity NetBenefits | Employee Benefits. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. Fund Information Manager(s): Ashley Fernandes Trading Symbol: FSDPX Start Date: September 29, 1986 Size (in millions): $852.42 Morningstar Category: Fund Natural Resources Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The materials industries can be significantly affected by the level and volatility of commodity prices, the exchange value of the dollar, import and export controls, worldwide competition, liability for environmental damage, depletion of resources, and mandated expenditures for safety and pollution control. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The fund may have additional volatility because of its narrow concentration in a specific industry. Non-diversified funds that focus on a relatively small number of stocks tend to be more volatile than diversified funds and the market as a whole. Click to enlarge Click to enlarge Market Review For the three months ending June 30, 2024, the materials sector, as measured by the MSCI U.S. IMI Materials 25/50 Linked Index, returned -5.31%, while the broad-based S&P 500® index gained 4.28%. The S&P 500® shook off a rough April and rose due to resilient corporate profits, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later this year. Amid this favorable backdrop for higher-risk assets, the index continued its late-2023 momentum and reached midyear just shy of its all-time closing high. Growth stocks led the narrow rally, with only three of 11 sectors topping the broader market. During the quarter, the backdrop for the global economy and earnings growth remained largely constructive, underpinning fairly low market volatility. The move toward global monetary easing inched forward, although persistent core inflation in the U.S. continued to keep the Fed on hold. Looking ahead, the pace and magnitude of global monetary easing remains uncertain, while the near-term risk of a recession in the U.S. appears muted. The MSCI materials sector index trailed the broader market, finishing last among the S&P 500's 11 sectors in Q2. A continued rally in the stock prices of the largest U.S. companies by market capitalization - concentrated in information technology (+14%) and communication services (+9%), fanned by AI fervor - once again stood out. Utilities rose roughly 5% to round out the contributors. In contrast, consumer discretionary and consumer staples each gained about 1%, while industrials (-3%), energy (-2%) financials (-2%), real estate (-2%) and health care (-1%) all fell below the waterline. The largest industry group in the MSCI materials sector index was specialty chemicals, which returned about -6% for the quarter, while the second-biggest segment, industrial gases, returned -3%. Among other sizable industry components, gold rebounded from recent struggles and gained roughly 16%, while copper advanced 4%. Meanwhile, paper & plastic packaging products & materials (-1%), commodity chemicals (-7%), fertilizers and agricultural chemicals (-8%), steel (-13%) and construction materials (-13%) each finished in negative territory. Performance Review In the second quarter, the fund's Retail Class shares returned -5.38%, versus the -5.31% return of the sector index, the MSCI U.S. IMI Materials 25/50 Linked Index, and the 4.28% gain of the broad-based S&P 500® index. Versus the sector index, stock selection in specialty chemicals, and positioning in copper and construction materials, notably contributed in Q2. Our picks in diversified metals & mining also helped but were partially offset by a disadvantageous overweight. Among individual stocks, a non-benchmark holding in First Quantum Minerals (OTCPK:FQVLF) (+22%) was the fund's top relative contributor. In late 2023, the company's shares fell sharply after its Cobre Panama mining operation - which was responsible for about 40% of First Quantum's revenue during the first nine months of 2023 - was abruptly shut down by the Panamanian government. Though the firm reported a net loss in 2024's first quarter, it has taken steps to stabilize its balance sheet the past six months, and also benefited from rising copper prices in Q2. We increased our stake. An overweight in water sanitation firm Ecolab (ECL) (+3%) and an underweight in paint and coatings business Sherwin-Williams (-14%) - two major benchmark components - also contributed to the fund's relative result in Q2. On May 1, Ecolab reported strong first-quarter performance, including 5% year-over-year organic sales growth and improved profitability. Meanwhile, in April, Sherwin-Williams reported a 1.4% year-over-year sales decline for its Q1. We notably increased our position in Ecolab, while Sherwin-Williams (SHW) was not in the portfolio at quarter end. Conversely, avoiding Newmont (NEM) (+18%), the world's largest gold-mining company, and specialty chemicals firm International Flavors & Fragrances (IFF) (+11%) were the fund's two biggest relative detractors. During the quarter, both companies reported stronger-than-expected Q1 results. Newmont, in particular, notably exceeded expectations, helped by rising prices for gold and soaring sales, which were up more than 50% over 2023's first quarter. Outlook and Positioning As of midyear, markets enjoy favorable momentum and somewhat easier financial conditions. The European Central Bank and the Bank of Canada both cut their policy interest rate by a quarter point in early June, becoming the first major central banks to ease after the rapid tightening cycle that began in 2022. Market projections signal an expectation of more rate cuts in 2024, including from the U.S. Federal Reserve and Bank of England, but the pace is significantly diminished compared with expectations entering this year. The global business cycle remains in expansion, with reasonably healthy stabilization. Economic expansion in the U.S. demonstrates evidence of mid- and late-cycle dynamics. Disinflation trends have progressed globally, but persistent core inflation in the U.S. has made the "last mile" of disinflation toward the Fed's target more difficult. After declining significantly from 2022, both headline and core inflation remain higher than 3%. Over the past 12 months, the materials sector gained about 8%, as measured by the MSCI sector index, versus the S&P 500's roughly 25% advance. Materials is a cyclical sector; if, in fact, U.S. interest rates start to fall later this year, we believe the sector has the potential to outperform the broader market. We continue to emphasize the industries we think have the strongest supply-demand profiles - especially commodity chemicals, industrial gases and copper. The commodity chemicals segment was, by far, the fund's largest overweight at quarter end. Within this segment, we held larger-than-index positions in Dow (DOW), Tronox Holdings (TROX), Cabot (CBT), Westlake (WLK) and Olin (OLN). Here, we believe several firms with U.S.-based manufacturing operations enjoy significant cost advantages over their global competitors, which could drive pricing power and business growth over the next three to five years. We reduced our overall allocation to this segment during the quarter. The industrial gases group was another notable industry overweight. In our estimation, companies in this group have an attractive mix of defensive qualities - with steady, reliable earnings growth and strong pricing power - and the ability to participate in an economic recovery. Larger-than-index positions at quarter's end included Linde, the portfolio's top holding. The fund also owned Air Products & Chemicals (APD), which was another top-five holding as of June 30. We modestly reduced our position in Linde but increased our stake in Air Products & Chemicals. We also like the longer-term prospects for copper, another of the portfolio's largest industry overweights versus the sector index. The metal is widely used in the production of electric vehicles and equipment that produces wind and solar power. Though these industries have seen recent challenges, we believe they will be important growth markets for the foreseeable future. Among copper names, the fund owned a non-index position in First Quantum Minerals, as well as an overweight in Freeport-McMoRan (FCX), which was the portfolio's fourth-largest holding at quarter end. As noted, First Quantum has experienced challenges following the unexpected closure of its Panamanian copper operations. But the company still has profitable mining operations in other countries and is likely to either reach a new agreement with Panama's government or receive a settlement. We added to the position in Q2, based on what we viewed as its attractive valuation, and we reduced our stake in Freeport-McMoRan. Specialty chemicals ended June as our largest industry underweight by a wide margin. Notable non-holdings among benchmark components included Albemarle (ALB), PPG Industries (PPG) and International Flavors & Fragrances. In general, we preferred the opportunities available in other industries. Thank you for your confidence in Fidelity's investment-management capabilities. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Fidelity's mission is to strengthen the financial well-being of our customers and deliver better outcomes for the clients and businesses we serve. Fidelity's strength comes from the scale of our diversified, market-leading financial services businesses that serve individuals, families, employers, wealth management firms, and institutions. With assets under administration of $12.6 trillion, including discretionary assets of $4.9 trillion as of December 31, 2023, we focus on meeting the unique needs of a broad and growing customer base. Privately held for 77 years, Fidelity employs more than 74,000 associates with its headquarters in Boston and a global presence spanning nine countries across North America, Europe, Asia and Australia.

Fidelity Select Utilities Portfolio Q2 2024 Review (Mutual Fund:FSUTX)

For the quarter, the fund's Retail Class shares gained 4.98%, edging the 4.51% advance of the MSCI U.S. IMI Utilities 25/50 Index and the 4.28% result of the broad-based S&P 500 Index. Investment Approach Fidelity® Select Utilities Portfolio is a sector-based, equity-focused strategy that seeks to outperform the benchmark through active management. Within the utilities sector, we favor companies with superior business models that are growing their dividends and trading at discounts, as we believe they have potential to outperform the index over time. We perform bottom-up, fundamental research to form a view on utilities regulation and power prices to complement our stock selection process. Our investment approach focuses on stocks with lower valuations and that have the best total-return potential. This includes utilities stocks that have been overly discounted due to more-volatile and less-predictable earnings streams. We test our price assumptions through collaborations with Fidelity's experienced research team, while leveraging a network of industry contacts. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 12/10/1981. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year, or estimated amounts for the current fiscal year in the case of a newly launched fund. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit Fidelity Funds | Mutual Funds from Fidelity Investments, Financial Professionals | Fidelity Institutional, or Fidelity NetBenefits | Employee Benefits. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. Fund Information Manager(s): Douglas Simmons Trading Symbol: FSUTX Start Date: December 10, 1981 Size (in millions): $1,351.86 Morningstar Category: Fund Utilities The value of the fund's domestic and foreign investments will vary from day to day in response to many factors. Stock values fluctuate in response to issuer, political, regulatory, market, or economic developments. You may have a gain or loss when you sell your shares. Investments in foreign securities, especially those in emerging markets, involve risks in addition to those of U.S. investments, including increased political and economic risk, as well as exposure to currency fluctuations. Because FMR concentrates the fund's investments in a particular industry, the fund's performance could depend heavily on the performance of that industry and could be more volatile than the performance of less concentrated funds and the market as a whole. The fund is considered non- diversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund; thus changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a more diversified fund. The utilities industries can be significantly affected by government regulation, financing difficulties, supply and demand of services or fuel, and natural resource conservation. Click to enlarge Click to enlarge Market Review U.S. stocks, as measured by the S&P 500® index, shook off a rough April and rose steadily due to resilient corporate profits, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later this year. Amid this favorable backdrop for higher-risk assets, the index continued its late-2023 momentum and reached midyear just shy of its all-time closing high. Growth stocks led the narrow rally, with only three of 11 sectors in the S&P 500® topping the broader market. Utilities posted the third-strongest return of the 11 sectors for the quarter, behind only information technology and communications services. Investor enthusiasm for companies exposed to the boom in artificial intelligence propelled each of these sectors. Looking at utilities specifically, companies with the ability to supply renewable energy to power AI-capable data centers benefited the most and fueled the sector's strong performance this quarter. Within the MSCI utilities index, the high-growth independent power producers & energy traders subindustry, representing only about 4% of the index, delivered the strongest gain (+15%). Here, Texas-based Vistra Energy (VST) (+24%), which announced plans to acquire a large nuclear power company, anchored the subindustry's result. In other categories, electric utilities, which comprised roughly 63% of the index, gained about 5%. Category names NextEra Energy (NXT) (+12%) and Constellation Energy (CEG)(+9%) both benefited from promising forecasts for increased power demand from AI data centers. In contrast, multi-utilities (+3%), which represented roughly 25% of the index, underperformed, hindered by results for index components WEC Energy (WEC) (-4%) and Ameren (AEE)(-3%). Gas utilities, one of the most defensive subindustries, returned -1%, hampered by sluggish fuel prices. Performance Review For the quarter, the fund's Retail Class shares gained 4.98%, edging the 4.51% advance of the MSCI U.S. IMI Utilities 25/50 Index and the 4.28% result of the broad-based S&P 500® Index. Industry selection contributed most to the fund's performance versus the MSCI sector index. Specifically, a notable overweight in the strong-performing independent power producers & energy traders segment delivered a boost to relative performance. Stock and industry selection among multi-utilities also helped. Conversely, stock selection among renewable electricity and electric utilities firms detracted most. The fund's notable overweight position in Vistra Energy, a Texas-based independent power producer, gained 24% this quarter. On May 8, the company reported better-than-expected first-quarter financial results, crediting strong synergies from its recent acquisition of Energy Harbor, which also prompted management to raise guidance for 2024. The acquisition of Energy Harbor allows Vistra to expand its zero-carbon power generation and electricity business by adding approximately 4,000 megawatts of nuclear generation and approximately 1 million additional retail customers. Vistra was the sixth-largest fund holding at quarter end. The fund also benefited from its underweight position in regulated electric utility Exelon (EXC) (-7%). In May, the company announced that it had missed its earnings estimates, mainly due to higher operating and maintenance costs and higher interest expenses. As a regulated utility, Exelon is a slowly growing company with a solid dividend. We reduced the position further to invest in companies we believe are poised to deliver stronger dividend growth over time. Conversely, the fund's biggest detractor relative to the MSCI index was an overweight position in NextEra Energy Partners (-6%). NextEra Energy Partners is the yield company subsidiary of fund holding NextEra Energy, which is the largest portfolio holding as of June 30. NextEra Energy Partners acquires and manages contracted clean energy projects with stable, long-term cash flows. This quarter, the company continued to struggle with balance sheet issues and high interest rates, which weighed heavily on the firm's stock price. That said, it has taken numerous steps to shore up its financials, including by selling some of its natural gas pipeline assets. We remained confident in the longer-term outlook for the company, and notably added to the fund's position based on its attractive valuation this quarter. Outlook and Positioning We continue to favor companies that offer above-average dividend growth that is generated by what we think are solid business models. We believe this could lead to stock investments that earn better-than-average returns over time. Our ideal stocks trade at discounted valuations at the time of purchase. As of June 30, the fund is overweight among independent power producers & energy traders, which represented about 8% of fund assets. Over time, we believe companies in this segment could benefit from higher power prices resulting from the shutdown of coal-fired plants, as well as proposed reforms we think benefit the economics of low-cost power generation. These companies could also be among the first beneficiaries of the increasing demand for clean energy to power the AI boom. We also like the dividend growth offered by certain electric utilities companies, and we maintained a notable overweight in this segment - at quarter end, electric utilities represented about 67% of fund assets. Most of the growth in the segment, measured by megawatts produced, came from the renewables group, which has benefited from federal subsidies and state mandates that promote more environmentally friendly electric power. We believe renewable energy remains poised to succeed over the long term, as alternatives such as wind and solar become more economically viable. The fund owns shares of several companies we believe are well-positioned to benefit from this trend, including NextEra Energy, Sempra (SRE) and Vistra, which were all among the portfolio's top-10 holdings as of June 30. As artificial intelligence expands and the U.S. continues to focus on electrifying the transportation sector and transitioning the country's power fleet toward renewable energy sources, fundamentals for most utility segments remain strong. Despite solid fundamentals, utilities as a sector is the most cheaply valued it has been - on a comparative price/earnings basis, relative to the S&P 500® index - in the past 20 years. At the same time, the average earnings growth and dividend growth rates are the highest they've been in about two decades. So, we believe the resilience of utilities as a group is being underestimated and underappreciated by the market. These companies are at the epicenter of the shift away from coal-generated power and toward renewable energy sources, which could translate to accelerated earnings growth for U.S. utilities over an extended horizon, as we view it. Additionally, as AI continues to become more ubiquitous, the energy demands from data centers are expected to grow exponentially. The rise in demand for these data centers could serve as a powerful trend fueling growth across the utilities sector. Given this dynamic, we believe utilities remain an attractive area for investment, given their stable earnings growth and low volatility when compared with the broader equity market. Due to the consistent, and rising, demand for energy, utilities have often, in recent years, grown in both up and down markets. As of June 30, we remain focused on our investment process of emphasizing stocks with stronger-than-average dividend growth. This approach typically leads us to purchase utilities stocks we think will benefit from higher power prices. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Fidelity's mission is to strengthen the financial well-being of our customers and deliver better outcomes for the clients and businesses we serve. Fidelity's strength comes from the scale of our diversified, market-leading financial services businesses that serve individuals, families, employers, wealth management firms, and institutions. With assets under administration of $12.6 trillion, including discretionary assets of $4.9 trillion as of December 31, 2023, we focus on meeting the unique needs of a broad and growing customer base. Privately held for 77 years, Fidelity employs more than 74,000 associates with its headquarters in Boston and a global presence spanning nine countries across North America, Europe, Asia and Australia.

Fidelity Select Technology Portfolio Q2 2024 Review (Mutual Fund:FSPTX)

Investment Approach Fidelity® Select Technology Portfolio is a sector-based, equity-focused strategy that seeks to outperform its benchmark through active management. We believe the value of technology stocks is in large part determined by the companies' future potential to generate earnings and cash flow. Our investment framework also focuses on identifying themes that impact the largest end markets, determining potential winners/losers, and how certain companies that are technology disruptors can impact incumbents. The technology sector is a very specialized part of the market, and our experience allows for proficiency in specific domains, aiding in recognizing investment opportunities when they arise. Through bottom-up research and by leveraging Fidelity's vast expertise - in addition to insights from industry experts, technologists, suppliers and competitors - we develop a differentiated view on the fundamentals in seeking to identify companies with compelling risk/reward profiles. Sector strategies could be used by investors as alternatives to individual stocks for either tactical- or strategic-allocation purposes. 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 07/14/1981. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year, or estimated amounts for the current fiscal year in the case of a newly launched fund. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit Fidelity Funds | Mutual Funds from Fidelity Investments, Financial Professionals | Fidelity Institutional, or Fidelity NetBenefits | Employee Benefits. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. Fund Information Manager(s): Adam Benjamin Trading Symbol: FSPTX Start Date: July 14, 1981 Size (in millions): $16,045.50 Morningstar Category: Fund Technology Stock markets, especially foreign markets, are volatile and can decline significantly in response to adverse issuer, political, regulatory, market, or economic developments. The technology industries can be significantly affected by obsolescence of existing technology, short product cycles, falling prices and profits, competition from new market entrants, and general economic conditions. Foreign securities are subject to interest rate, currency exchange rate, economic, and political risks. The fund may have additional volatility because of its narrow concentration in a specific industry. Non-diversified funds that focus on a relatively small number of stocks tend to be more volatile than diversified funds and the market as a whole. Click to enlarge Click to enlarge Market Review In Q2, the information technology sector, as measured by the MSCI U.S. IMI Information Technology 25/50 Index, advanced 10.08%, versus 4.28% for the broadly based S&P 500® index. Technology stocks led the broader market to a series of new all-time highs, outpacing the other 10 sectors in the S&P 500®. Tech stocks followed the pattern of the broader market in Q2, shaking off a down month in April and then rising in May and June. Within the tech sector, semiconductor (+20%) shares were a key driver of performance, as keen interest in generative artificial intelligence fueled a frenzy for certain stocks. In the still-early phases of developing the technology for generative AI, investors have been focused on "picks and shovels" companies engaged in building out the required infrastructure, in which semiconductors and semiconductor equipment are playing starring roles. Nvidia (NVDA), with a roughly 37% gain in the MSCI index, once again stood out as a major beneficiary of this trend, with its full-stack solutions of graphics chips, software and systems. Broadcom (AVGO) (+22%) manufactures network interface cards for large-scale artificial intelligence computers. Teradyne (TER) (+32%), a maker of chip-testing equipment, also performed well this quarter, largely due to strong AI-fueled growth in its memory-testing equipment. Technology hardware, storage & peripherals (+21%) was another significant driver of the tech sector's performance. Here, the influence of Apple (+23%) was dominant, given this stock's 16% average weighting in the MSCI index during the quarter. Although Apple's quarterly results remained unimpressive, investors were intrigued by the company's plans, articulated at its Worldwide Developers Conference on June 10, to incorporate generative AI into its products. Expectations rapidly developed for new "supercycles" for products like the iPhone® and iMac®, spurring a strong gain for the stock immediately following that conference. Systems software (+6%) and application software (-3%), home to MSCI index components such as Microsoft (MSFT) (+6%), Salesforce (CRM) (-15%), Intuit (+1%) and ServiceNow (NOW) (+3%), lagged the two chip-related groups amid ongoing questions about how long it will take for the transition from "AI enablers" to "AI adopters" to play out. Meanwhile, internet services & infrastructure (-12%) and IT consulting & other services (-10%) lagged behind other groups in the MSCI index. With IT budgets increasingly devoted to generative AI projects, less capital was available for other purposes. Thus, we saw disappointing performance from Accenture (ACN)(-12%), IBM (IBM) (-9%), Okta (OKTA) (-11%), Shopify (SHOP) (-14%) and MongoDB (MDB) (-30%). Performance Review For the quarter, the fund gained 10.00%, versus 10.08% for the MSCI U.S. IMI Information Technology 25/50 Index and well ahead of the S&P 500®. The fund's performance versus the MSCI index suffered due to an overweight in the lagging internet services & infrastructure group, an underweight in technology hardware, storage & peripherals, and non-index exposure to passenger ground transportation via Uber Technologies (UBER) (-5%), which we view as a tech stock in many ways. At the stock level, a sizable overweight in onsemi (ON) (-7%) hurt more than any other holding. The company supplies chips that go into drive trains of electric cars and help with driver-assistance systems like cameras and sensors. The company's silicon carbide chips also help extend the range of electric vehicles. In late April, onsemi beat Wall Street expectations for quarterly revenue and profit, and reported a stable gross margin due to lowered costs in the face of weakening electric vehicle sales. However, the company also forecast second-quarter revenue and profit below analysts' estimates, fanning concerns of a delay in the recovery of automotive chip demand, as a softening EV market and excess inventory at auto dealers are expected to hit orders for onsemi's chips. We bought more of the stock, believing that the long-term prospects for the company are bright. Overweighting Marvell Technology (MRVL) (-1%) also detracted. Marvell is a semiconductor and equipment firm serving data centers, mobile carriers, automotive companies and various consumer end markets. The company has benefited from exuberance for artificial intelligence, but AI is only a small part of Marvell's diversified business, and most of the company's other revenue segments have been flat or down the past two years. On May 30, the firm reported a 12% decline in revenue for the three months ending May 4. We added a bit to this position. Conversely, an underweight in the lagging IT consulting & other services and application software segments lifted the fund's relative performance for the quarter. The portfolio's top contributor in both absolute and relative terms was Nvidia (+37%). Shares of Nvidia rose steadily as the chips it makes continued to power demand for generative artificial intelligence. Nvidia dominates the market for advanced graphics chips that are the lifeblood of new generative AI systems. In mid-May, the firm reported outstanding financial results for the three months ending April 28. In addition, management raised its financial forecast for the firm's next fiscal quarter. We trimmed this position a bit, but Nvidia remained the fund's top overweight at quarter end. Outlook and Positioning With valuations for semiconductor stocks relatively elevated, it will be important for companies to deliver earnings that justify the prevailing optimism. Short term, we wouldn't be surprised to see choppy action in chip stocks and the broader U.S. market. However, we continue to like the longer-term prospects for the companies in the portfolio, driven by a number of powerful themes that remain in play, including the investment in infrastructure and software needed to support the growth of generative AI and the evolving data center architecture. Other key trends include the growing importance of assuring adequate semiconductor supply, digital transformation, and the increasing chip content in electric vehicles, driven by further adoption of these vehicles and autonomous driving capabilities. We continue to find it useful to look at whether companies in certain end markets are "overearning" or "underearning" relative to what they should be earning under normal circumstances. Personal computers are an example of an industry that was overearning during the pandemic. Demand for PCs subsequently slumped, but the incorporation of new AI capabilities could reinvigorate this market, and it is a market we are watching closely. On the other hand, autos are an example of a market segment where unit sales are still running below 2019 levels - first due to a shortage of semiconductors, and more recently because of high interest rates on car loans. With that said, the chip shortage has eased, and auto dealers have rebuilt their inventories. We are optimistic about this market's prospects, especially given the increasing chip content per car. As a result of our bottom-up approach, the portfolio's largest industry overweight at quarter end - by a considerable margin - was semiconductors. In fact, the fund's top-four overweights at quarter end were semiconductor stocks: Nvidia, NXP Semiconductors (NXPI), onsemi and Marvell Technology. Nvidia has been one of the market's hottest stocks since Q4 of 2022. We consider it the most direct beneficiary of the expanding market for generative AI. And while no stock can be relied on to rise without interruption, we continue to like the firm's long-term prospects. NXP is a key supplier of chips for the auto industry. Onsemi provides chips for sophisticated electronics in electric and gas cars, as well as industrial automation components. Marvell has exposure to communications infrastructure and cloud/data centers, as well as a burgeoning opportunity in the auto market. On the other hand, application software ended the quarter as the portfolio's largest sector underweight, and systems software was in second place. We believe many software names have been bought based on overly optimistic assumptions about how quickly generative AI can be implemented, and we are waiting for better opportunities to buy. During the quarter, we increased the fund's stake in Apple from an underweight to an overweight, in the process boosting our representation in technology hardware, storage & peripherals. This was driven by our increased optimism about the potential impact of new generative AI features on sales of the company's products. As always, we thank you for your confidence in our stewardship of the fund, and in Fidelity's investment-management capabilities. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Fidelity's mission is to strengthen the financial well-being of our customers and deliver better outcomes for the clients and businesses we serve. Fidelity's strength comes from the scale of our diversified, market-leading financial services businesses that serve individuals, families, employers, wealth management firms, and institutions. With assets under administration of $12.6 trillion, including discretionary assets of $4.9 trillion as of December 31, 2023, we focus on meeting the unique needs of a broad and growing customer base. Privately held for 77 years, Fidelity employs more than 74,000 associates with its headquarters in Boston and a global presence spanning nine countries across North America, Europe, Asia and Australia.

Fidelity Select Health Care Portfolio Q2 2024 Review

The fund remains optimistic about long-term health care prospects, focusing on equipment, bioprocessing, and biotech stocks, while being cautious about high valuations in GLP-1 treatments. Performance Summary Cumulative Annualized 3 Month YTD 1 Year 3 Year 5 Year 10Year/ LOF1 Select Health Care Portfolio (MUTF:FSPHX) Gross Expense Ratio: 0.65%2 -2.46% 4.18% 5.10% -1.00% 8.75% 9.63% S&P 500 Index (SP500, SPX) 4.28% 15.29% 24.56% 10.01% 15.05% 12.86% MSCI US IMI Health Care 25/50 -1.28% 6.97% 10.31% 4.02% 10.47% 10.75% Morningstar Fund Health -2.58% 3.61% 5.06% -3.58% 6.48% 8.38% % Rank in Morningstar Category (1% = Best) -- -- 61% 52% 40% 36% # of Funds in Morningstar Category -- -- 176 161 139 114 Click to enlarge 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 07/14/1981. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year, or estimated amounts for the current fiscal year in the case of a newly launched fund. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Retail Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit Fidelity Funds | Mutual Funds from Fidelity Investments, Financial Professionals | Fidelity Institutional, or Fidelity NetBenefits | Employee Benefits. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any.Cumulative total returns are reported as of the period indicated.For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. Not FDIC Insured * May Lose Value * No Bank Guarantee Click to enlarge Market Review Health care stocks returned -1.28% in the second quarter of 2024, according to the MSCI U.S. IMI Health Care 25/50 Index, behind the 4.28% gain of the broad-based S&P 500® index. The broader U.S. stock market shook off a rough April and rose steadily due to resilient corporate profits, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later this year. However, excitement about high-growth megatrends - fanned by AI fervor and reflected in the roughly 14% gain for the information technology sector of the S&P 500® Index - continued to captivate investors at the expense of other sectors. As a result, health care stocks lagged the broad market in Q2. Among industries within the MSCI health care index, health care technology stocks (-20%) - a relatively small benchmark weight - lagged the broader sector the most. This was largely the result of idiosyncratic factors weighing on medical tech companies such as Veeva Systems (VEEV, -21%), a cloud solutions company focused on life sciences. The stock dropped in April, following the departure of the firm's CEO, and in May when Veeva lowered its Q2 revenue guidance despite better-than-expected Q1 financial results. Health care utilization and costs continued to ramp higher in the second quarter of 2024, as patients who delayed surgeries and treatment during the pandemic continued to seek services in hospitals, doctors' offices and ambulatory care centers in increased numbers. This weighed on the health care services (-13%) group. In addition, in April, the U.S. government reported that Medicaid Advantage payments would not increase to the degree that the industry had hoped for. As a result, large health care services stocks, such as CVS Health (CVS, -25%), underperformed. The only health care industries to advance this period were biotechnology (+3%), as well as pharmaceuticals and managed care (+2% each). Within these industries, individual stock performance was mixed. For example, pharma giant Eli Lilly (LLY, +17%) gained strongly on the back of the excitement surrounding glucagon-like peptide 1 agonists - the innovative new class of treatments for diabetes and obesity. However, legacy pharma companies such as Bristol-Myers Squibb (BMY, -23%) and Johnson & Johnson (JNJ, -7%) underperformed, in part due to sluggish quarterly sales. Performance Review Largest contributors vs. Benchmark Holding Market Segment Average Relative Weight Relative Contribution (basis points)* Boston Scientific Corp. (BSX) Healthcare Equipment 9.03% 115 Alnylam Pharmaceuticals, Inc. (ALNY) Biotechnology 0.77% 51 Bristol-Myers Squibb Co. (BMY) Pharmaceuticals -1.51% 37 Johnson & Johnson (JNJ) Pharmaceuticals -5.95% 33 Glaukos Corp. (GKOS) Healthcare Equipment 1.37% 31 * 1 basis point = 0.01%. Click to enlarge Largest detractors vs. Benchmark Holding Market Segment Average Relative Weight Relative Contribution (basis points)* Penumbra, Inc. (PEN) Health Care Equipment 3.29% -64 10X Genomics, Inc. (TXG) Life Sciences Tools & Services 0.83% -53 Inspire Medical Systems, Inc. (INSP) Health Care Equipment 1.28% -50 Exact Sciences Corp. (EXAS) Biotechnology 0.69% -45 CVS Health Corp. (CVS) Health Care Services 1.18% -41 * 1 basis point = 0.01%. Click to enlarge For the quarter, the fund returned -2.46%, underperforming the MSCI sector index. Stock choices in biotechnology and life sciences & tools detracted from the fund's performance versus the sector index the past three months, as did positioning in health care services and health care technology. Among individual stocks, the fund was hurt the most by its overweight in health care equipment firm Penumbra (PEN, -19%). Shares of the neuro/vascular device maker were hurt by disappointing Q1 earnings-per-share results. Still, we remained excited about the firm's product cycle and future growth prospects. Therefore, it remained the fund's No. 7 holding at the end of June. It also hurt to overweight 10x Genomics (TXG), a gene sequency technology company, because the stock returned -48% during the past three months. The company released mixed Q1 2024 financial results this period, with earnings in line with Wall Street's expectations, but revenue falling short due to a rise in operating costs and a decrease in the firm's consumables revenue. Still, the company recently launched four promising products, which should support its growth. We continue to hold the position on June 30. On the positive side, a large overweight in Boston Scientific (BSX, +12%) was our top individual relative contributor. The stock rose in late April when the maker of medical devices reported quarterly financial results that topped Wall Street's expectations, along with an increase in its annual profit forecast. The firm noted particularly strong demand for its heart devices, including pacemakers and stents, which comprise most of Boston Scientific's revenue. Though we trimmed our stake, Boston Scientific was the fund's largest overweight and holding on June 30. It also helped to overweight Alnylam Pharmaceuticals (ALNY, +63%). The stock surged in late June 24, on news the maker of RNA interference therapeutics achieved favorable top-line results in a late-stage clinical trial for its cardiovascular treatment, vutrisiran. Management noted the drug's potential to address the needs of patients with a steadily progressive, debilitating and ultimately fatal disease. We added to our position, making it a top-15 holding. Outlook and Positioning We're optimistic regarding our outlook for health care stocks over the long term and maintaining patience in the short term. We're also positive on the fund's holdings as of June 30, and we only made some slight shifts this quarter. Utilization continues to weigh on the managed health care industry, and Medicare advantage companies grapple with lower pricing capabilities and higher costs. We modestly added to the fund's weighting in managed care this quarter on attractive valuations, and the fund is slightly overweight the industry at period end. Notably, we increased our position in UnitedHealth Group (UNH), which went from our No. 4 holding at the end of Q1 2024 to our No. 2 position on June 30. Our long-term thesis on the group has not changed and we think firms here exhibit strong long-term fundamentals. We are positive on health care equipment names Boston Scientific and Penumbra; bioprocessing firm Danaher (DHR); biotech company Regeneron Pharmaceuticals (REGN); and Insulet (PODD), maker of the Omnipod device for diabetes. These were the fund's five-largest overweights at quarter end. Health care equipment stocks have benefited from the recovery in health care utilization in 2023 and early 2024, and we expect it to continue. Our expectation is that utilization will begin to moderate in 2025. In this industry, our largest positions are in Boston Scientific and Penumbra - the fund's largest- and seventh-largest holdings at the end of June. Boston Scientific is in the midst of two key product cycles, with one already going strong. The fund is also invested on Glaukos, a maker of iDose TR, a small ophthalmic device to treat glaucoma that was approved by the FDA in December, and Procept BioRobotics (PRCT), which produces a device to treat prostate cancer. We're also interested in bioproduction stocks. Bioprocessing companies make the tools (e.g., bioreactors, fluid bags and cellculture media) used to produce complex drugs, such as monoclonal antibodies (mAbs), and cell and gene therapy. The stocks of bioprocessing firms appeal to us, given their relatively stable business models and the multiple long-term tailwinds that could drive long-term sales growth. The bioprocessing industry is expected to hit the bottom of its COVID inventory in the first half of 2024. From there, the stocks should see better growth and a material cyclical snap back. Danaher is our largest position in this space and the fund's fourth-biggest holding, though I'll note we trimmed our position in Q2. Elsewhere, we expect to see more M&A activity in the biotech space, as capital raising in the sector has increased and companies have become more realistic about their valuations. As big pharma stocks face looming patent cliffs stretching out into the late-2020s, we think more of the large-cap pharma firms will try to fill these gaps by acquiring innovative biotechs. We're especially bullish on the small- to mid-cap area of the biotech market, where we are finding opportunities with attractive risk-reward dynamics. Exuberance around the new-generation GLP-1 treatments for diabetes and obesity have created an environment of "have" and "have nots" regarding the innovative drugs. We are skeptical on the sky-high numbers analysts and companies are projecting for these drugs. As a result, the fund is underweight Eli Lilly (LLY) and we do not own Novo- Nordisk (NVO), given high valuations, lack of clarity on how much optimism is already priced into the stocks, and our view on the high earnings momentum ahead. Additionally, we expect that by next year we will see peak data on the effectiveness of GLP-1 drugs. We plan to look for opportunities to further reduce the fund's weight in Lilly. In terms of risks, the upcoming elections in 2024 election may cause turbulence for the sector, especially as the rhetoric around drug pricing ramps up. It may also be a choppy environment for health care services stocks that provide of Medicare/Medicaid coverage. While we can't make explicit predictions on potential election outcomes, we are keeping our eye on some of the prospective drug regulations making their way into Congress. Original Post Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors. Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks. Fidelity's mission is to strengthen the financial well-being of our customers and deliver better outcomes for the clients and businesses we serve. Fidelity's strength comes from the scale of our diversified, market-leading financial services businesses that serve individuals, families, employers, wealth management firms, and institutions. With assets under administration of $12.6 trillion, including discretionary assets of $4.9 trillion as of December 31, 2023, we focus on meeting the unique needs of a broad and growing customer base. Privately held for 77 years, Fidelity employs more than 74,000 associates with its headquarters in Boston and a global presence spanning nine countries across North America, Europe, Asia and Australia.

Fidelity Value Discovery Fund Q2 2024 Review

For the three months ending June 30, 2024, the fund's Retail Class shares returned -3.47%, trailing the -2.25% return of the benchmark Russell 3000®Value Index. U.S. stocks gained 4.28% in Q2, according to the S&P 500® index, after shaking off a rough April and rising steadily due to resilient corporate profits, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later this year. Amid this favorable backdrop for higher-risk assets, the index continued its late-2023 momentum and reached midyear just shy of its all-time closing high. Growth stocks led the narrow rally, with only three of 11 sectors topping the broader market. The backdrop for the global economy and earnings growth remained largely constructive, underpinning fairly low market volatility. The move toward global monetary easing inched forward, although persistent core inflation in the U.S. continued to keep the Fed on hold. Compared with the benchmark, security selection hampered the fund's results, especially in communication services, consumer staples, industrials and information technology. Stock picks in consumer discretionary and energy, however, added value. The fund's biggest individual relative detractor was managed care provider Centene (CNC) (-16%). This firm was significantly exposed to higher-than-projected Medicare Advantage costs as seniors utilized health services far more than expected. As of June 30, however, we continued to hold a stake in Centene. Apart from the legitimate challenges facing the Medicare Advantage market, we continue to like managed care companies because their business models are so resilient. Most notably, they are able to reprice their offerings annually and quickly adjust to changes in the economic environment. Concern about Medicare Advantage similarly weighed on health care conglomerate CVS Health (CVS) (-25%), another of the fund's relative detractors this quarter. In early May, the company sharply reduced its annual earnings forecast, causing its shares to hit a four-year low. As of June 30, we believe CVS is well positioned to offer a complete health care solution for its clients, but at a fraction of the price of other managed-care companies. The company's retail business now provides less than 10% of earnings, and, going forward, we believe the integration of its pharmacy-benefits management and managed-care businesses should drive margins. Also in health care, an overweight in drugmaker Bristol-Myers Squibb (BMY) (-22%) further hurt relative performance. As some of the company's later-stage drug trials have failed to meet expectations, the stock has been a lackluster performer. Still, we remain confident that the stock's price on June 30 reflects a large margin of safety, presuming that the firm's drugs under development enjoy better results in the next couple of years. Entertainment giant Disney (DIS) (-19%) also hurt the fund. Much of that decline came in early May after the company reported solid quarterly financial results that nevertheless lagged analysts' expectations. Still, we continued to see opportunity in Disney - our No. 10 holding on June 30 - and added to the fund's stake this quarter. We consider this a fantastic franchise with enormously valuable intellectual property. However, the stock has lately been underperforming on a cash-flow and earnings basis because of how deeply the firm has invested in its business. Now, under relatively new leadership, Disney is focused on improving financial metrics, and we believe the company can significantly boost cash flow, potentially aiding its stock price. On the positive side, the fund's top contributor was an out-of-benchmark stake in AstraZeneca (AZN) (+15%). Shares of this Anglo-Swedish drugmaker rose in April after the firm reported better-than-expected quarterly financial results due to strong demand for its most important drugs and healthy sales of its partnered medicines. In our view, AstraZeneca benefits from a strong pipeline of drugs coming to market and an excellent portfolio of already-approved drugs we expect to grow nicely for the next few years. A larger-than-benchmark holding in H&R Block (HRB) (+11%) further contributed to relative performance. We believe this tax-preparation firm has done a very good job at investing in margin-boosting projects, including technology to support its do-it-yourself customers. In our opinion, H&R Block also is acting wisely with the cash it produces by buying back shares while also providing a generous dividend to shareholders. Another relative contributor was our lack of exposure to benchmark component Intel (INTC), whose shares returned about -30% for the past three months, falling in late April after the maker of PC and server chips announced a disappointing financial forecast for the second quarter. Business results for the first quarter, also announced on April 25, were mixed, with earnings topping the consensus estimate and sales coming up short. We did not see Intel as a strong fit for our investment approach and chose to invest elsewhere this quarter. Our view is that a stock's market value eventually will converge with its intrinsic value - or true underlying worth - over time. This is a crucial aspect of our investment approach. We use four different valuation measures when determining the intrinsic value of a company, and we invest in what we believe are high-quality firms. By high quality, we mean corporations that operate in a specific niche or possess a strong competitive position that provides a "moat," or barrier to entry, to their businesses. We also look for above-average returns on invested capital. We expect the fund's holdings to have a significantly higher return on equity (ROE) - a measure of profitability - than the benchmark because of this focus on quality, which we believe has led to lower earnings volatility over time. We pay close attention to a firm's cash generation, which we think can contribute to faster long-term growth when it's combined with a high ROE. Or, to put it more succinctly: We believe that a stock that is merely cheap doesn't represent a great value, but a quality stock at a low price does. As of the end of June, the largest individual overweights within the fund - all of which were stocks that we saw as good fits for our investment strategy - were insurance firms Chubb (CB) and Travelers (TRV), managed-care company Cigna (CI), electric utility PG&E (PCG), and cable and media company Comcast. All but PG&E were among the portfolio's top-10 holdings on June 30. Conversely, our largest stock-specific underweights were retailer Walmart, energy firm Chevron (CVX), pharmaceutical company Merck (MRK), U.K.-based chemical company Linde (LIN) and communication service provider Verizon (VZ). We avoided these benchmark components in Q2, as we did not see compelling value opportunities among these names. As of the end of the quarter, we were continuing to find the consumer staples category to be an attractive source of investment opportunity. Consumer staples businesses tend to be defensive, meaning that demand for their products tends to stay relatively consistent regardless of the underlying economic environment. While consumer staples stocks have been out of favor, we see their attractive valuations and high business quality as reasons to own them over the long term. Consumer staples finished March as the fund's largest sector overweight. The portfolio also maintained a meaningful overweight in the utilities sector, our second-largest relative overweight on June 30. Here, we were able to find stocks offering solid return prospects at generally reasonable valuations. Although these stocks tend to underperform when interest rates are high because their dividend yields become less attractive on a relative basis, they also offer investors a guaranteed rate of return. We believe this can make them more attractive than other yield-oriented segments of the equity market, including real estate, which was the fund's largest underweight at the end of Q2. We pay close attention to economic trends but spend little time trying to predict them. Instead, we let valuations mainly drive our investment decisions as we seek businesses with strong franchises, wide competitive moats and stock prices with a sufficient margin of safety built in. In a volatile market environment, we're sticking to our investment approach, evaluating stocks one by one and working hard to understand the range of potential outcomes for any given company. Regardless of the market backdrop, however, we continue to stick to our approach and the individual stocks we feel offer the best risk-reward trade-offs, as we seek to take advantage of attractive value opportunities when they emerge. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.

Fidelity Select Financials Portfolio Q2 2024 Review

The past three months, the financials sector, as measured by the MSCI U.S. IMI Financials 5% Capped Linked Index, returned -1.64%, while the S&P 500® index gained 4.28%. After shaking off a rough April, the broader market rose in May and June, but the rally was mainly confined to certain stocks in the information technology and communication services sectors. Resilient corporate profits, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later this year were factors driving the narrow advance. Only three of 11 sectors topped the broader market in Q2, and financials was one of six sectors that lost ground while the S&P 500® was hitting a series of new all-time highs. Investors' emphasis on growth stocks over value resulted in most industry groups in the MSCI index producing lagging returns for the quarter. For example, diversified banks, the segment with the largest weighting in the index, rose about 1%, while regional banks returned -1%. Overall, banks reported fairly solid financial results for the first quarter, as higher noninterest income and lower provision expenses more than offset a decline in net interest income. Some noteworthy players in the diversified banks segment included JPMorgan Chase (JPM, +2%), Bank of America (BAC, +6%) and Wells Fargo & Company (WFC, +3%), while regional banks included M&T Bank (MTB,+5%), East West Bancorp (EWBC, -7%) and Citizens Financial Group (CFG, -4%). Property & casualty insurance stocks returned roughly -3% the past three months, despite the industry continuing to benefit from an improving environment for premium pricing and higher investment returns on increased yields. Within this group, Travelers Companies (TRV) returned -11%, while American Financial Group (AFG) logged a -9% result and Arch Capital Group (ACGL) finished with a 9% gain. Transaction & payment processing services (-8%) was the weakest- performing industry group in the MSCI index during the quarter. While new technologies, including generative AI, are expected to improve customer service, fraud detection, speed of completion and other aspects of digital payments, intense competition is a headwind for many providers. Visa (V, -6%) and Mastercard (MA, -8%) remain leaders in this group, while PayPal Holdings (PYPL, -13%) and Global Payments (GPN, -27%) are also key players. Elsewhere, investment banking & brokerage (+6%) was one of the better-performing segments of the MSCI index, while asset management & custody banks (-3%) and consumer finance (-1%) were weaker. For the three months ending June 30, 2024, the fund returned-1.50%, topping the MSCI U.S. IMI Financials 5% Capped Linked Index but trailing the broadly based S&P 500® index. Stock selection in insurance brokers, regional banks and reinsurance lifted the fund's performance versus the MSCI sector index. Baldwin Insurance Group (+23%) headed the fund's list of individual relative contributors for the quarter. The stock became oversold in late 2023, as the company was affected by higher interest rates, which led to higher net interest costs and negative earnings revisions. There were also some delays in profit margin improvements due to operational issues, the timing of investments and other factors. However, a recovery in the stock that began in December 2023 carried over into the first half of 2024, as investors recognized its significant discount versus peers, and the company's earnings outlook stabilized while maintaining a solid growth profile. Overweighting Wells Fargo & Company (+3%) proved timely as well. This diversified bank has businesses in consumer and commercial banking, as well as investment banking and wealth management, and it has been a core holding in the fund for quite some time. The lender has had a long and difficult road to navigate with regulators, stemming from mismanagement in years past, but we think the company is finally ready to move on from that legacy, and we look for profitability to improve as a result. A double-digit Q1 earnings beat helped the stock outperform this quarter. We trimmed our stake a bit in Q2, but Wells was the fund's No.2 holding at midyear. On the negative side, investment choices and an overweight in transaction & payment processing services weighed on our relative result for Q2. The biggest relative detractor, Global Payments, returned roughly -27%, falling sharply after the provider of payment technology and software solutions announced first-quarter financials on May 1. Although the results were largely in line with management's guidance, investors were disappointed by what was viewed as weak growth and margins in Global Payments' merchant segment, which accounts for about 70% of its business. Following the Fed's committee meeting on June 12, Chair Jerome Powell noted progress on containing inflation and signaled that the central bank had one rate cut penciled in for later this year. That could change for better or worse, depending on what happens with inflation and the labor market in the meantime. The federal unemployment rate remains near historical lows, at only 4.1% in June, up from 4.0 the previous month. A resilient labor market suggests that a soft landing - that is, a modest economic slowdown with no recession - could still be in the cards. At any rate, in the current volatile environment, we anticipate an equity market that should lend itself to stock picking using our careful, bottom-up fundamental analysis. As of June 30, the fund's largest industry overweight was regional banks. Within this group, M&T Bank and Popular were key individual overweights. In all cases, we are focusing on regional banks with what we consider solid deposit franchises and good growth potential. Diversified banks was also a noteworthy overweight, with meaningfully heavier-than-index positions in Wells Fargo & Company, Bank of America, KeyCorp (KEY) and Citigroup. Elsewhere, the fund maintained a significant overweight in transaction & payment processing services. Aside from top overweight Mastercard, Global Payments was among the portfolio's largest overweights in this segment. We reduced the portfolio's overweight in reinsurance during the second quarter, mainly by lowering our stake in Reinsurance Group of America. This stock remained a core overweight, as we continue to view the company as well run and benefiting from a favorable market position in an attractive industry. With that said, the valuation has rebounded from extremely low levels in the wake of the pandemic and is therefore somewhat less attractive than it had been. On the other hand, the fund's biggest industry underweight at quarter end was financial exchanges & data. Individual underweights of note in this group were S&P Global (SPGI), Intercontinental Exchange (ICE) and CME Group (CME), none of which the fund owned in the quarter. Companies in this category tend to be somewhat defensive, and we thought there were better opportunities in other groups. Additionally, we continued to carry a sizable underweight in multi-sector holdings as of June 30 by virtue of avoiding Berkshire Hathaway (BRK.A, BRK.B). As always, we thank you for your confidence in our stewardship of the fund, and in Fidelity's investment-management capabilities.

Fidelity Select Communication Services Portfolio Q2 2024 Review

For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. U.S. stocks, as measured by the S&P 500® index, posted solid gains in the second quarter, according to the S&P 500® index, after shaking off a rough April and rising steadily due to resilient corporate profits, a frenzy over generative artificial intelligence and the Federal Reserve's likely pivot to cutting interest rates later this year. Amid this favorable backdrop for higher-risk assets, the index continued its late-2023 momentum and reached midyear just shy of its all-time closing high. Growth stocks led the narrow rally, with only three of 11 sectors topping the broader market. Against this dynamic backdrop, communication services - representing a diverse mix of telecommunications stocks and higher-growth names in areas such as internet and media - posted the second-strongest return of the 11 sectors in the S&P 500® index for the quarter, behind only information technology. Investor enthusiasm for companies exposed to the boom in artificial intelligence propelled gains in these two sectors. By subindustry, interactive media & services, which represented about 52% of the MSCI sector index, gained about 12% in Q2. Here, Google-parent Alphabet (GOOG) rose roughly 21%, propelled by strong performance from the firm's Search, YouTube and Cloud units, the latter a central piece of the company's AI strategy. Publishing returned 10%, led by New York Times (+19%), which reported increases in digital subscribers and higher average revenue per user. Wireless telecommunication services (+10%) also had a solid gain. In contrast, cable & satellite (-8%) had the weakest result. Hurt by weak subscriptions trends, index components such as Liberty Broadband (LBRDK)(LBRDA)(-4%), Comcast (CMCSA)(-9%), Altice (ATUS) (-22%) and Sirius XM (-26%) declined. Movies & entertainment (-4%) was hurt by index stock Walt Disney (DIS) (-19%), which reported a net loss for its second fiscal quarter in May. Alternative carriers (-3%) also posted a loss. For the quarter, the fund's Retail Class shares gained 7.82%, solidly outpacing the 5.61% advance of the MSCI U.S. IMI Communication Services 25/50 Index and the 4.28% result of the broad-based S&P 500® Index. Overall, favorable stock selection boosted the fund's performance over the MSCI sector index. Specifically, stock and subindustry selection in interactive media & services contributed the most. Choices in alternative carriers, movies & entertainment and interactive home entertainment also helped. Conversely, a non-index position in passenger ground transportation detracted most. Within the interactive home entertainment category, the fund's non-index position Singapore-based online gaming services and e-commerce company Sea (SE) gained 33% for the three months. Coming into this quarter, Sea's e-commerce business was under competitive pressure from TikTok, which weighed heavily on Sea's stock price. This quarter, shares of Sea reversed course amid news that TikTok was facing regulatory scrutiny in Indonesia, which investors viewed as a tailwind for Sea. We believe Sea is generating strong growth in its e-commerce business, as well as in its video-game segment. We also believe there is potential for sustainable growth as the firm enters new geographies and continues to expand profitability. As of June 30, Sea was the fund's ninth-largest position. Elsewhere, a larger-than-index stake in Liberty Latin America, a cable, phone and internet provider that serves more than 20 countries in Latin America and the Caribbean advanced 38% this quarter. In early May, Liberty Latin America reported strong financial results, driven by an increase in subscribers in its broadband and postpaid service bases. Additionally, the company announced a $200 million share repurchase program through December 2026. Conversely, in the passenger ground transportation group, our non-index shares of Uber Technologies (UBER) (-6%) detracted. In early May, the provider of ride-hailing, courier, food-delivery and freight-transport services reported a surprising loss for Q1, as legal settlements and equity investments in other companies hampered its results, even as demand for rides and deliveries rose for the quarter. Looking ahead, regulatory challenges loom for Uber's rides business, mostly related to minimum-wage rules for drivers and disputes about drivers being classified as independent contractors or employees. Despite these challenges, we remain confident in the Uber's longer-term prospects, and it was the fund's 8th-largest position as of June 30. The fund's outsized stake in cable company Altice (-22%) also notably detracted. Increased competition in the fiber business and doubts about competitor Comcast's consideration of a potential acquisition of Altice dampened the outlook for Altice this quarter. We increased the fund's stake in Q2. As of June 30, the fund is positioned in stocks of companies we believe have the potential for long-term revenue and earnings growth, while also seeking to own shares of companies where we see price-to-fair-value dislocations and where we believe the market is underestimating the duration or magnitude of growth. In our view, stock prices ultimately follow the earnings and cash flow of the companies they represent. Position sizing in the portfolio is driven by our fundamental analysis on a company-by-company basis and in-depth research of key trends in the communication services sector, and it is based on conviction and differentiation relative to the market's assessment of a company' prospects, as reflected by its price. Ideally, we are looking to find opportunities where the rate of growth is either mispriced or underestimated, but we are willing to pay a premium for faster growth. The fund's key foundational investment themes remain the growth in broadband and the shift to digital. As of June 30, the fund had a sizable underweight in integrated telecom services. This stance reflects the maturity of the wireless market and the tepid growth of the industry's major players, notably Verizon Communications. The underweight also reflects our interest in investing in other, faster-growing areas. Though the fund primarily invests in U.S.-based firms, we do invest in companies based in foreign countries when they meet our criteria. We also maintained positions in companies that leverage wireless resources to bring services to consumers and are application-based businesses, such as ride-sharing and food-delivery service provider Uber Technologies and online retailing giant Amazon.com, two non-index holdings that were the fund's two largest overweights as of June 30. Customer engagement with video games continues to rise, as did in-game spending, proving to be largely resilient despite macroeconomic headwinds. We believe growth in e-sports - competitive video gaming - represents an emerging opportunity, as its current market is estimated at about 400 million viewers worldwide. These video-game companies offer a wide breadth of content, strong brand names and recurring revenue streams that can grow in time, based on our analysis. These factors also make video-game developers prime acquisition targets. As of June 30, the fund mainly owns stocks of companies we believe can capitalize on the world going digital. Trends such as rising engagement with mobile apps, streaming and interactive entertainment, direct-response advertising, demand for faster broadband, and adoption of 5G and cloud services remain very strong. Additionally, the rollout of 5G networks is expected to integrate connected computing with our physical world in cars, wearables and sensors. We believe the big opportunity for 5G lies within making both these new connections and the data collected useful to consumers and businesses. We're paying close attention to companies with a lead in cloud computing and artificial intelligence, which we believe should make them well-positioned for an increasingly connected world. We are optimistic about the long-term prospects for each of these areas, and we still see a significant runway for certain communication services companies to create value well above what's priced into current share prices. Furthermore, in the short term, there are several firms that are generating solid free cash flow and maintaining strong balance sheets. As such, we believe that if a recession were to materialize and demand diminish, these businesses should have a buffer, enabling them to also improve efficiency by slowing hiring and spending in order to emerge from this cycle even stronger. Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.