A sound investment process and strong management team underpin Fidelity Stocks for Inflation ETF's Morningstar Medalist Rating of Silver. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's investment process inspires confidence and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. 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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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Fidelity Stocks for Inflation ETF earns a High Process Pillar rating. The most significant contributor to the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The parent firm's five-year risk-adjusted success ratio of 64% also contributes to the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their noteworthy success ratio suggests that the firm does well for investors and that this fund may benefit from that. The parent firm's strong risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.3 stars, influences the rating as well.

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 Fidelity Stocks for Inflation Factor Index℠.  The fund normally invests at least 80% of its assets in securities included in the Fidelity Stocks for Inflation Factor Index℠, which is designed to reflect the performance of stocks of large and mid-capitalization U.S. companies with attractive valuations, high quality profiles and positive momentum signals, and emphasizing industries that tend to outperform in inflationary environments. 

 The portfolio is overweight in energy and basic materials relative to the category average by 6.8 and 5.4 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and financial services, underweight the average by 6.8 and 5.1 percentage points of assets, respectively. The portfolio is composed of 105 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 30.9% of the fund’s assets were concentrated in the top 10 fund holdings, compared to the category’s 48.8% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 105% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

Fidelity Stocks for Inflation ETF's strong team drives the strategy's Above Average People Pillar rating. There’s a deep bench of five managers listed on the fund. The team is well equipped, with an average of 11 years of portfolio management experience. Together, they manage a total of 60 strategies, with a Gold asset-weighted average Morningstar Medalist Rating, indicating the 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 Stocks for Inflation ETF

FCPI tracks an index of U.S. large- and mid-cap stocks based on multi-factor criteria with structural tilts towards inflation-sensitive sectors and industries. The index is weighted based on market capitalization.

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Fidelity Stocks for Inflation is an ETF designed to excel when inflation is a dominant factor, and it has proven its effectiveness in this regard. FCPI is not a pure play on inflation but rather an S&P 500 fund built for inflation, making it suitable for buy-and-hold investors who anticipate a trend towards higher inflation or a boom in commodity sectors and energy. In the short term, FCPI may struggle relative to the S&P 500 Index as inflation peaked in mid-2022 and commodity prices have come down, but investors looking to accumulate FCPI at a relative discount may find their opportunity in the coming months.

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