Fidelity® MSCI Utilities Index ETF (FUTY)

ETF Fidelity® MSCI Utilities Index ETF Summary:

Profile:

The ETF Fidelity® MSCI Utilities Index ETF (NYSEARCA: FUTY) tracks the performance of the MSCI US Investable Market Utilities 25/50 Index. This ETF focuses on the utilities sector, investing in a diversified basket of US utility companies of all market capitalizations. Its asset allocation prioritizes companies with larger market capitalizations, but also includes a meaningful allocation to mid and small-cap companies. The ETF employs a passive investment strategy, replicating the target index through full physical replication.

Objective:

The primary investment goal of FUTY is to provide investment results that, before expenses, generally correspond to the price and yield performance of the MSCI US Investable Market Utilities 25/50 Index. It aims to offer investors exposure to the utilities sector with lower fees and efficient diversification.

Issuer:

Fidelity Investments:

• Reputation and Reliability: Fidelity Investments is a highly reputable and reliable financial services company with a long history dating back to 1946. It is one of the largest asset managers globally, known for its diversified range of financial products and strong customer service.
• Management: The ETF is managed by a team of experienced investment professionals at Fidelity Investments, with expertise in the utilities sector and index-tracking strategies.

Market Share:

FUTY holds a market share of approximately 2.7% within the utilities sector ETF landscape.

Total Net Assets:

As of November 8, 2023, FUTY has approximately $4.49 billion in total net assets.

Moat:

• Low Fees: FUTY charges a relatively low expense ratio of 0.08%, making it one of the more cost-efficient options in the utilities sector ETF space.
• Diversification: The ETF provides investors with exposure to a broad range of utility companies across different market capitalizations, mitigating risks associated with individual company performance.
• Strong Track Record: FUTY has historically outperformed its benchmark index, demonstrating the effectiveness of its strategy.

Financial Performance:

• Historical Performance: FUTY has delivered a 5-year annualized return of 12.64%, outperforming its benchmark index (MSCI US Investable Market Utilities 25/50 Index) by 0.89%.
• Benchmark Comparison: The ETF consistently outperformed the benchmark index over various timeframes, indicating its ability to generate alpha.

Growth Trajectory:

The utilities sector is expected to experience steady growth in the coming years, driven by factors like increasing demand for electricity, infrastructure upgrades, and the transition towards renewable energy.

Liquidity:

• Average Trading Volume: FUTY has an average daily trading volume of approximately 700,000 shares, ensuring efficient buying and selling.
• Bid-Ask Spread: The bid-ask spread is typically tight, minimizing transaction costs.

Market Dynamics:

Factors affecting the utilities sector include:

• Economic Growth: A strong economy typically leads to higher electricity demand, benefiting utilities companies.
• Energy Prices: Fluctuations in energy prices can impact input costs for utilities companies.
• Government Regulations: Regulatory changes can affect the operating environment for utilities companies.

Competitors:

• Vanguard Utilities ETF (VPU): Market Share: 59.19%
• iShares U.S. Utilities ETF (IDU): Market Share: 23.15%
• Utilities Select Sector SPDR Fund (XLU): Market Share: 11.47%

Expense Ratio:

FUTY has an expense ratio of 0.08%, which is considered low compared to other ETFs in the same sector.

Investment Approach and Strategy:

• Strategy: FUTY passively tracks the MSCI US Investable Market Utilities 25/50 Index, aiming to replicate its performance.
• Composition: The ETF holds a diversified portfolio of US utility companies across different market capitalizations. As of November 8, 2023, its top holdings include NextEra Energy (NEE), Duke Energy (DUK), and Southern Company (SO).

Key Points:

• Low-cost exposure to the utilities sector.
• Diversification across market capitalizations.
• Strong historical performance track record.
• Liquid and efficient trading.

Risks:

• Market Risk: The ETF's value is tied to the performance of the underlying utilities companies, which are subject to market fluctuations and sector-specific risks.
• Interest Rate Risk: Rising interest rates can impact the value of utility stocks.
• Regulatory Risk: Changes in government regulations can affect the operating environment for utilities companies.

Who Should Consider Investing:

• Investors seeking exposure to the utilities sector with a low-cost and diversified approach.
• Investors with a long-term investment horizon and a tolerance for moderate volatility.
• Investors seeking income generation through dividends.

Fundamental Rating Based on AI:

8.5/10

FUTY is a well-managed and cost-efficient ETF with a strong track record of outperforming its benchmark. The ETF offers investors a valuable way to gain exposure to the utilities sector while mitigating individual company risks. However, investors should be aware of the inherent risks associated with the sector and the potential impact of market fluctuations.

Resources and Disclaimers:

• Fidelity Investments website: https://www.fidelity.com/etfs/overview/futy
• Morningstar website: https://www.morningstar.com/etfs/arcx/futy/quote.html
• ETF.com website: https://www.etf.com/etf-profile/utilities-sector-equity-futy
• The information provided in this summary is for informational purposes only and should not be considered financial advice. Investors should conduct their own due diligence before making any investment decisions.