uploads///Fidelity Advisor Europe Fund Class A

How Industrials Hurt the Europe-Focused FHJUX in September


Oct. 28 2015, Published 2:02 p.m. ET

Performance evaluation

The Fidelity Advisor Europe Fund Class A (FHJUX) fell by 4.0% in September 2015 from the previous month. In the three- and six-month periods ending September 30, the fund fell by 7.9% and 5.2%, respectively. In the YTD (year-to-date) period, the fund fell by 0.3%.

Except the YTD period, in which FHJUX is fifth among the ten funds we’re reviewing in this series, the performance of the fund has been below average in all other periods, putting it in the eighth spot for the one- and three-month periods ending in September.

Let’s look at what contributed to FHJUX’s below average performance.

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Portfolio composition and contributions to returns

FHJUX has the longest track record among the ten funds in our review. It has been in inception since October 1986. According to its latest geographical disclosure, companies from the United Kingdom, Sweden, and Germany are the top three invested geographies, in that order.

Since the latest complete portfolio of the fund available to us is as of August 2015, we will consider that as our base. For September, we’ll consider valuation changes for our analysis. All portfolio percentages mentioned from here on refer to their weights according to changes in valuation from August to September.

Here’s a breakdown of FHJUX’s holdings and contributions:

  • Financials, healthcare, and industrials are the top three invested sectors, in that order. In 2014, though the top two sectors were the same, consumer staples had the third biggest sectoral exposure in place of industrials.
  • Industrials were the biggest negative contributors to the fund’s overall returns for September. They were led down by the French aerospace group Zodiac Aerospace. The B shares of Finnish company Cargotec Oyj and France’s Rexel SA also contributed negatively in a greater measure than others.
  • Financials followed industrials and were led down by the United Kingdom’s Standard Chartered. ING Groep NV (ING) also contributed negatively to the sector’s returns.
  • The healthcare sector was third in terms of the quantum of negative contribution for September. Shire (SHPG) was the biggest in terms of negative contribution to returns. The sponsored ADR (American Depository Receipt) of Teva Pharmaceutical Industries Limited (TEVA) and shares of Sanofi (SNY) also led the sector down.

Notably, the quantum of negative returns from the consumer discretionary sector were reduced by positive contributions to return by Adidas AG (ADDYY), RELX NV (RENX), and Christian Dior SE (CHDRY).

Reasons behind performance

Even though industrials had only the third largest exposure, stock picks in the sector hurt the fund’s performance in September. Financials, in general, have had a hard time, but industrials still outdid the sector in terms of negative contribution to returns. The small exposure to consumer staples also hurt the fund as they have done reasonably well over the selected period.

Read the next part of this series for a look at the next Europe-focused mutual fund in our analysis, the Ivy European Opportunities Fund Class A (IEOAX).


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