A sound investment process and strong management team underpin Fidelity MSCI Communication ServicesETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy's effective investment philosophy supports a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in quality exposure and volatility exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

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Trade Desk

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Fidelity MSCI Communication ServicesETF earns a High Process Pillar rating. This fund tracks an index, which increases its process rating. Historical data, like Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks to provide investment returns that correspond, before fees and expenses, generally to the performance of the MSCI USA IMI Communication Services 25/50 Index.  The fund invests at least 80% of assets in securities included in the fund's underlying index. The fund's underlying index is the MSCI USA IMI Communication Services 25/50 Index, and which represents the performance of the communication services sector in the U.S. equity market. It may or may not hold all of the securities in the MSCI USA IMI Communication Services 25/50 Index. The fund is non-diversified. 

 The portfolio is overweight in communication services by 19.6 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 12.8 and 3.8 percentage points of assets, respectively. The portfolio is positioned across 109 holdings and is relatively top-heavy. Of the strategy's assets, 73.9% are concentrated within the top 10 holdings, as opposed to the typical peer's 64.0%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 18% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

Fidelity MSCI Communication ServicesETF's strong team drives the strategy's Above Average People Pillar rating. There are three managers listed on the fund: Paul Whitehead, Jennifer Hsui, Peter Sietsema. Experience on the team is abundant, with 13 years of average portfolio management experience. Together, they manage a total of 29 strategies, with a Silver asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

Above Average

People

Fidelity earns an Above Average Parent rating because of its ability to stay ahead of its competition.

The firm's successful stock-picking mutual funds fueled its rise to prominence, and it has adapted well to investor preferences that have shifted markedly over the past two decades. Index funds and exchange-traded funds have garnered most of the industry's flows as money has gushed from actively managed products—Fidelity's included. Yet overall, the asset-management division has continued to achieve positive organic growth by introducing or maintaining aggressive pricing on its own suite of passively managed funds and expanding its menu of client-demanded investment structures, such as managed accounts and collective investment trusts. These moves are made possible by the firm's strong distribution network, scale, established brand, and willingness to tolerate losses on some products in pursuit of broader strategic objectives.

The firm is not without blemishes. It could stand to rationalize its lineup of active equity funds and do better to maintain continuity in an equity fund's portfolio construction as the fund's leadership inevitably changes.

Overall, the firm has served its funds' investors well. It boasts a topnotch fixed-income division and remains home to some of the industry's most talented equity managers and a strong team supporting its well-run target-date series.

Parent

Fidelity MSCI Telecommunication Services Index ETF

FCOM tracks a market-cap-weighted index of stocks in the US communication services sector.

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The development of new social media platforms seems to occur at an increasingly breakneck pace and Meta's new Twitter competitor, Threads, is no exception. The freshly released platform ushered in 70 million sign-ups in just its first full day since its public debut Wednesday night, according to Meta CEO Mark Zuckerberg on Friday.

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