Fidelity Momentum Factor ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy earns a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in momentum exposure and an underweight in quality exposure compared with category peers. Momentum exposure is attributed to holding stocks currently on a winning streak and selling those that are on a downtrend. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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

Microsoft

Apple

NVIDIA

Amazon

Alphabet

Eli Lilly

Berkshire Hathaway Inc. - Ordinary Shares - Class B

Broadcom

UnitedHealth Group

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 Momentum Factor ETF earns a Below Average Process Pillar rating. 

The process is strengthened by tracking 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. However, the rating 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 parent firm's five-year retention rate of 72% also holds the process back.

 This strategy skews toward smaller, more undervalued companies than its average peer in the Large Growth Morningstar Category. Looking at additional factor exposure, this strategy has continually had exposure to high-momentum stocks compared with Morningstar Category peers in the last few years. Momentum is based on the premise that stocks that have recently outperformed will continue to outperform, and those that have underperformed will stay behind. In recent months, the strategy was more exposed to the Momentum factor compared with its Morningstar Category peers as well. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. In recent months, however, the strategy had less Yield factor exposure over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in financial services and consumer defensive relative to the category average by 4.6 and 2.7 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 8.4 and 4.5 percentage points of assets, respectively. The portfolio is positioned across 128 holdings and is less top-heavy than peers. Specifically, 35.4% of the strategy's assets are concentrated within the top 10 fund holdings, as opposed to the category average's 54.8%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 137% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Fidelity Momentum Factor ETF benefits considerably from its team, earning it an 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 solid long-term prospects. The strategies average a Gold asset-weighted Morningstar Medalist Rating, indicating a position 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 Momentum Factor ETF

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