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

 The strategy's effective investment philosophy supports an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in volatility exposure and quality exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a high quality exposure is rooted in holding stocks with low financial leverage and strong returns on equity. 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

Alphabet

Verizon

Comcast

Disney

Netflix

AT&T

T-Mobile US

Electronic Arts

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 an Above Average Process Pillar rating. This fund tracks an index, which increases its process rating. Historical data, such as Morningstar's Active/Passive Barometer, shows that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The process is limited by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period.

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 19.3 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 12.5 and 3.5 percentage points of assets, respectively. The strategy owns 109 securities and is relatively concentrated. Specifically, 71.6% of the fund’s assets are housed within the top 10 holdings, as opposed to the category’s 62.2% average. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

Above Average

Process

Fidelity® MSCI Communication ServicesETF benefits considerably from its team, earning it an Above Average People Pillar rating. There are two managers listed on the fund: Paul Whitehead, Jennifer Hsui. Experience on the team is abundant, with 18 years of average portfolio management experience. Together, they manage a total of 16 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.

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.

FCOM is an ETF that offers exposure to U.S. communication services stocks, but it has a concentration risk, with Meta and Alphabet accounting for 40% of the fund. The top ten holdings of FCOM make up approximately 69.88% of its total net assets, with Meta Platforms Inc and Alphabet Inc being the largest positions. FCOM faces competition from other communication services ETFs such as XLC and VOX, but it has a lower expense ratio and has performed in line with VOX.

FCOM: Way Too Much Concentration Risk

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Alphabet reported its third-quarter 2023 earnings with its revenue and earnings beating the estimates. However, slow growth in its Google Cloud revenues which missed the estimates, dragged the shares of the tech giant.

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Meta Platforms (META) reported its most profitable quarter in years and the highest quarterly revenues since going public more than a decade ago.

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Alphabet shares slumped on Oct 25 as the company's cloud revenues missed estimates. While the industry's challenge in developing and shaping AI infrastructure caused this weakness, the rebound could be seen in 2024.

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The renowned social media platform Meta Platforms (META) is scheduled to report earnings on Oct 25 after market close.

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The search engine behemoth Alphabet (GOOGL) is expected to report its earnings on Oct 24.

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Six of seven big tech stocks, known as, Magnificent Seven, are likely to report in the coming days. One tech behemoth of the group, Tesla, has already reported.

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These are the stocks billionaires are betting on currently. Retail investors can play these stocks or the related ETFs to invest like billionaires.

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Examine the response of ETFs with investments in Disney to the company's Q3 earnings outcomes.

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Among the top five big tech stocks, Amazon, Facebook-parent Meta and Google-parent Alphabet delivered impressive results, garnering positive reactions from investors, while Apple and Microsoft disappointed investors.

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With the Telecom sector posting mixed results for Q2 2023, look into Telecom ETFs to capitalize on the opportunities present.

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These ETFs could fly high in August as the broader market is likely to rally on upbeat economic data points and cooling inflation.

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Meta Platform (META) posted its first double-digit revenue growth since 2021, boosted by the artificial intelligence (AI) craze.

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Philip Morris beat both earnings and revenue estimates in the second quarter. Look into some ETFs to capitalize.

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Earnings news is back on the menu for investors this week, and with that news comes ETFs to play those results. Whether it's Johnson & Johnson (JNJ), or Netflix (NFLX), ETFs can help.

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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.

Meta's New Threads Fuels Growth In Communication Services ETFs

With Netflix pushing its global content and introducing a new ad-tier, look into some ETFs with exposure to Netflix, to gain an advantage and invest in the streaming company.

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While earnings expectations are high for FCOM in terms of growth, I think they are fair as they assume a steady return on equity. Even in a downside scenario, FCOM offers a margin of safety.

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Walt Disney (DIS) beat estimates for both earnings and revenues but posted subscriber losses in Disney+ streaming services for the second consecutive quarter.

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With AT&T and Verizon reporting their earnings for Q1 of 2023, take a look into how the Telecommunications sector is performing.

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Meta Platforms (META) reported solid first-quarter 2023 results, wherein it outpaced revenue and earnings estimates as well as issued upbeat revenue guidance. META shares spiked as much as 11% to their highest level since January 2022 in aftermarket hours on elevated volume.

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Google parent Alphabet (GOOGL) reported solid first-quarter 2023 results, topping both revenue and earnings estimates. Investors should tap the strength with ETFs with a substantial allocation to Alphabet.

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Alphabet Inc shares took a beating on the news that Samsung may shift to Bing as the default browser on their devices. Already having a mixed review for their AI chatbot, Bard, Google is trying to integrate AI in their browser.

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FCOM holds 100+ Communication Services stocks in all size segments. It has a category-leading 0.08% expense ratio and $515M in assets. Performance compared to peers like XLC and VOX is solid, but the sector has historically underperformed the market. FCOM also comes with increased volatility and a poor growth profile.

News for Fidelity MSCI Telecommunication Services Index ETF ETF (FCOM)