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

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in liquidity exposure and an overweight in quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a high quality exposure is rooted in holding stocks that are consistently profitable, growing, and have solid balance sheets. 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

Exxon Mobil

Chevron

ConocoPhillips

EOG Resources

Marathon Petroleum

Schlumberger

Phillips 66

Pioneer Natural Resources

Valero Energy

Williams

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 MSCI Energy ETF earns a High Process Pillar rating. The predominant contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Noteworthy risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the process was successful over that period. The parent firm's five-year risk-adjusted success ratio of 64% supports the process. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. Their impressive success ratio suggests that this firm does well for investors and that this fund may benefit from that.

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 Energy 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 Energy 25/50 Index, and which represents the performance of the energy sector in the U.S. equity market. It may or may not hold all of the securities in the MSCI USA IMI Energy 25/50 Index. The fund is non-diversified. 

 The portfolio is overweight in energy by 12.6 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are utilities and industrials, with utilities underweighting the average portfolio by 7.2 percentage points of assets and industrials similar to the average. The strategy owns 121 securities and is relatively concentrated. In particular, 65.2% of the fund’s assets are housed within the top 10 holdings, compared with the typical peer's 51.9%. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 8% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

High

Process

Fidelity MSCI Energy ETF'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. The team is well equipped, with an average of 13 years of portfolio management experience. Together, they manage a total of 29 strategies, with solid long-term prospects. The strategies average a Silver 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 MSCI Energy Index ETF

FENY tracks a market-cap-weighted index of US energy companies. The index includes those companies deemed investable by MSCI and covers 98% of the market.

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Fidelity Energy MSCI ETF FENY is probably on the radar for investors seeking momentum. The fund just hit a 52-week high and moved up 30.78% from its 52-week low price of $20.73/share.

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Designed to provide broad exposure to the Energy - Broad segment of the equity market, the Fidelity MSCI Energy Index ETF (FENY) is a passively managed exchange traded fund launched on 10/21/2013.

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Two energy behemoths - Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) - reported mixed fourth-quarter earnings.

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Fidelity MSCI Energy Index ETF offers exposure to the energy sector, which may be reasonably valued and offer a margin of safety for investments. The fund is top-heavy, with its top two holdings, Exxon and Chevron, accounting for 35% of its total weight. FENY has a low expense ratio of 0.08%, allowing investors to keep almost all of their dividends, and a distribution yield of 3.43%.

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Two energy behemoths - Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX) - reported worse-than-expected third-quarter earnings.

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Most of the oil biggies are expected to surprise on earnings. However, the sector's earnings are expected to decline 35.5% from the year-ago level.

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The Fidelity MSCI Energy ETF (FENY) provides cost-efficient exposure to major oil, gas, and refining companies. The global macro-economic environment is uncertain, posing demand risks, but supply-side factors such as Saudi Arabia's production cuts support oil prices. The FENY ETF currently yields 3.36% and is well positioned to benefit from what I expect to be strong oil and refining markets in the second half of this year.

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The two energy behemoths ??? Exxon Mobil Corp. (XOM) and Chevron Corp. (CVX)?

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Exxon Mobil (XOM) and Chevron (CVX) are reaping profits not seen since 2008. Both the oil majors collectively posted $18 billion in first-quarter profits, showing resilience even as oil and natural gas prices declined.

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US Energy stocks appear cheap on a trailing basis but rising capex spending and falling oil prices suggest earnings and free cash flows will fall sharply over the coming months. The Fidelity MSCI Energy Index ETF yields just 3.4%, while the forward yield is 3.2%, having fallen from over 15% in 2020.

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Fidelity's FENY Energy ETF has roughly doubled since my Seeking Alpha "reopening" thesis BUY-rated article back in February of 2021. However, the question now is - to quote the famous Pulp Fiction line: "What now?" My answer is also from the movie: "What now? Let me tell you what now."

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Bucking the overall market trend, the Fidelity Energy ETF has delivered a +96% total return since my Seeking Alpha BUY rating article in February of last year. At this point, I see no reason to exit the position prior to Q3 earnings, as most all these energy stocks should - once again - post very strong results.

News for Fidelity MSCI Energy Index ETF ETF (FENY)