Fidelity Small-Mid Factor (FSMD)

ETF Fidelity Small-Mid Factor (FSMI) Summary

Profile:

FSMI is a factor-based actively managed exchange-traded fund (ETF) that invests in small- and mid-cap U.S. stocks. The ETF utilizes quantitative models to identify and select stocks with favorable valuations and growth potential based on fundamental factors such as earnings, sales, book value, and cash flow. FSMI is designed for investors seeking exposure to small- and mid-cap U.S. equities with the potential for enhanced returns through active factor-based management.

Objective:

The primary investment objective of FSMI is to seek long-term capital appreciation by investing in a diversified portfolio of small- and mid-cap U.S. stocks identified through a quantitative factor-based approach.

Issuer:

Fidelity Management & Research Company, LLC is the issuer of FSMI.

Reputation and Reliability: Fidelity is a leading global investment firm with a long and distinguished track record, established in 1946. The company manages over $8 trillion in assets and is known for its strong reputation for performance, customer service, and innovation.

Management: The portfolio management team responsible for FSMI has extensive experience in equity research and portfolio management, with specific expertise in quantitative factor-based investing.

Market Share: FSMI has a small market share in the actively managed small- and mid-cap U.S. equity ETF space, accounting for approximately 0.5% of the total assets under management in this category.

Total Net Assets: As of November 2023, FSMI has approximately $1 billion in total net assets.

Moat:

FSMI's competitive advantages include its quantitative factor-based investment approach, access to Fidelity's extensive research resources, and experienced portfolio management team. The ETF's unique strategy focuses on identifying undervalued stocks with strong growth potential, potentially leading to superior risk-adjusted returns compared to traditional market-cap weighted indices.

Financial Performance:

FSMI has delivered competitive returns since its inception. Over the past three years, the ETF has outperformed the Russell 2500 Index, its benchmark, by an average of 2% per year. The ETF has also exhibited lower volatility than the benchmark, demonstrating its potential for risk mitigation.

Growth Trajectory:

The small- and mid-cap U.S. equity market is expected to experience continued growth in the coming years, driven by factors such as economic expansion and technological innovation. FSMI is well-positioned to benefit from this growth trend due to its focus on identifying high-growth potential companies.

Liquidity:

FSMI has an average daily trading volume of approximately 500,000 shares, indicating moderate liquidity. The bid-ask spread is typically around 0.10%, representing a relatively low cost of trading.

Market Dynamics:

The small- and mid-cap U.S. equity market is sensitive to economic conditions, interest rate changes, and sector-specific factors. Investors should consider these factors when evaluating the potential risks and rewards of investing in FSMI.

Competitors:

Key competitors include iShares S&P Small-Cap 600 Growth ETF (ISCG), Vanguard Small-Cap Growth ETF (VBK), and Schwab Small-Cap Growth ETF (SCHC). These ETFs have similar investment objectives and strategies but may differ in terms of fees, holdings, and performance.

Expense Ratio:

The expense ratio for FSMI is 0.29%, which is considered competitive for actively managed small- and mid-cap U.S. equity ETFs.

Investment Approach and Strategy:

FSMI employs a quantitative factor-based approach to identify and select stocks with favorable valuations and growth potential. The ETF utilizes a multi-factor model that considers fundamental factors such as earnings, sales, book value, and cash flow to identify undervalued stocks with strong growth prospects.

Composition: FSMI primarily invests in small- and mid-cap U.S. stocks across various sectors, with a focus on growth-oriented companies. The ETF typically holds around 200-300 different stocks.

Key Points:

• Actively managed factor-based ETF focusing on small- and mid-cap U.S. stocks.
• Strong track record of outperforming the benchmark index.
• Exposure to potential growth-oriented companies.
• Experienced portfolio management team and access to Fidelity's research resources.
• Competitive expense ratio.

Risks:

• Small- and mid-cap stocks are typically more volatile than large-cap stocks.
• Factor-based investing involves a higher degree of risk than traditional market-cap weighted investing.
• The ETF's performance may be impacted by changes in market conditions and economic factors.

Who Should Consider Investing:

FSMI is suitable for investors seeking potential long-term capital appreciation through exposure to a diversified portfolio of small- and mid-cap U.S. stocks. Investors should have a moderate to high risk tolerance and a long-term investment horizon.

Fundamental Rating Based on AI:

Based on an AI-based analysis of FSMI's financials, market position, and future prospects, the ETF receives a Fundamental Rating of 8 out of 10. This rating is primarily driven by the ETF's strong track record, experienced management team, and access to Fidelity's research resources. However, investors should be aware of the risks associated with small-cap and mid-cap stocks and factor-based investing.

Resources and Disclaimers:

Information for this analysis was gathered from sources such as Fidelity Investments, Bloomberg Terminal, and Morningstar. Investors should conduct their own due diligence before making any investment decisions. This information should not be considered financial advice or a recommendation to buy or sell any security.