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What’s Been Ailing the Fidelity Blue Chip Growth Fund?

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Updated

Performance evaluation

The Fidelity Blue Chip Growth Fund (FBGRX) has declined by 1.9% YTD (year-to-date) in 2016. But this decline has led to below-average performers for the year so far. Still, fiscal 2016 has been poor for the fund across periods, and even in the one-year period, the fund has emerged as a below-average performer.

We have graphed the fund’s performance against two ETFs: the iShares S&P 500 Growth ETF (IVW) and the iShares Russell 1000 Growth ETF (IWF). Let’s look at what has contributed to this below-average performance by the fund YTD in 2016.

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Portfolio composition and contribution to returns

Stock picks from the healthcare sector are primarily responsible for FBGRX’s poor showing YTD in 2016. Allergan (AGN) has hurt the sector, with Regeneron Pharmaceuticals (REGN), and Celgene (CELG), among others, contributing negatively as well. Hardly any pick has worked, in fact. Only Boston Scientific (BSX) and Intuitive Surgical (ISRG) have made small positive contributions so far.

Industrials are a distant second to healthcare in terms of negative contributions in 2016 so far. SolarCity (SCTY) has led declines from the sector, including Boeing (BA) and Delta Air Lines (DAL). Dycom Industries (DY) has made a small positive contribution.

Both consumer-focused sectors—discretionary and staples—have done the most to reduce the negative performance of FBGRX. Consumer staples have been led by Coca-Cola (KO), with sizable contributions from Nu Skin Enterprises (NUS) and Herbalife (HLF). Meanwhile, Amazon.com (AMZN) and Adidas (ADDYY) have helped discretionary stocks. However, the discretionary sector has been held back by Restoration Hardware Holdings (RH) and Chipotle Mexican Grill (CMG).

Investor takeaway

Although the healthcare sector has been a substantial drag on FBGRX, other stock picks have not done well, especially when compared to the SPDR S&P 500 ETF (SPY). For instance, although the consumer staples sector has contributed the most in reducing the drag on the fund, its components have underperformed those making up SPY. The energy sector has also contributed positively, but its quantum of contribution has been less than those stocks comprising the sector in SPY. Industrials and information technology stock picks have been a disappointment as well.

Investors currently invested—especially those nearing the completion of their investment horizon—need to be careful about the fund’s performance. FBGRX has seen better days in the past, but it’s putting up quite a poor show at present.

In the next part, we’ll look at the historical portfolios of the Fidelity Growth Company Fund (FDGRX).

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