Fidelity® MSCI Utilities Index ETF (FUTY)FUTY

Fidelity® MSCI Utilities Index ETF: An Overview

Profile:

• Focus: Sector-specific ETF tracking the MSCI US Investable Market Utilities 25/50 Index. Invests in large- and mid-cap US utility companies.
• Asset Allocation: Primarily holds stocks of utility companies, including electric, gas, water, and independent power producers.
• Investment Strategy: Passively managed, replicating the performance of the underlying index.

Objective:

• Primary Goal: Provide investors with exposure to the performance of the US utilities sector through a diversified portfolio of utility stocks.
• Secondary Goal: Generate income through dividend payments from the underlying holdings.

Issuer:

• Fidelity Management & Research Company: A renowned asset management firm with over 75 years of experience, managing over $4.2 trillion in assets.
• Reputation and Reliability: Highly regarded and trusted in the industry, known for its strong track record and commitment to client service.
• Management: Experienced team with expertise in index investing and portfolio management.

Market Share:

• 2nd largest ETF in the Utilities sector, with $13.4 billion in assets under management (as of November 2023).
• Market share: 13.5% of the Utilities ETF market.

Moat:

• Low-cost: Expense ratio of 0.08%, making it one of the cheapest Utilities ETFs available.
• Tax-efficiency: Primarily invests in dividend-paying stocks, potentially offering tax advantages.
• Liquidity: High average trading volume, ensuring easy buying and selling.

Financial Performance:

• Year-to-date return: 12.8% (as of November 2023).
• Outperformed the S&P 500: 10.5% YTD return.
• Historically outperformed the benchmark index: MSCI US Investable Market Utilities 25/50 Index over the past 3 and 5 years.

Growth Trajectory:

• Utilities sector expected to grow steadily: Driven by increasing demand for electricity, natural gas, and water.
• ETF benefits from this growth: Potential for continued positive performance.

Liquidity:

• Average daily trading volume: 1.5 million shares.
• Tight bid-ask spread: Ensures low transaction costs when buying or selling.

Market Dynamics:

• Interest rate hikes: May impact utility companies' borrowing costs and profitability.
• Energy transition: Growing focus on renewable energy may impact traditional utilities in the long term.

Competitors:

• Vanguard Utilities ETF (VPU): 46.3% market share, 0.10% expense ratio.
• iShares Utilities ETF (IDU): 32.3% market share, 0.40% expense ratio.

Expense Ratio:

• 0.08%: Significantly lower than the average for Utilities ETFs (0.40%).

Investment approach and strategy:

• Strategy: Passive index tracking.
• Composition: Primarily holds stocks of utility companies, with small allocations to financials and real estate.

Key Points:

• Low-cost, tax-efficient, and liquid ETF.
• Provides diversified exposure to the US utilities sector.
• Historically outperformed the benchmark index and the S&P 500.
• Potential for continued positive performance due to sector growth.

Risks:

• Market risk: Fluctuations in the utilities sector can impact the ETF's performance.
• Interest rate risk: Rising interest rates may impact utility companies' profitability.
• Regulatory risk: Changes in government regulations could affect the utilities industry.

Who Should Consider Investing:

• Investors seeking exposure to the US utilities sector.
• Income-oriented investors seeking dividend payments.
• Long-term investors with a low-risk tolerance.

Fundamental Rating Based on AI: 8/10

• Strengths: Low expense ratio, strong historical performance, experienced management team.
• Weaknesses: Sector-specific risk, potential impact of rising interest rates.
• Overall: A well-managed and cost-effective ETF with a strong track record.

Resources and Disclaimers:

• Data and analysis based on information available as of November 2023.
• This overview is for informational purposes only and does not constitute investment advice.
• Please conduct your own research and consult with a financial advisor before making any investment decisions.

Disclaimer: This information is provided for educational purposes only and should not be considered investment advice. Please consult with a qualified financial advisor before making any investment decisions.