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Assessing FLFAX’s Year-to-Date Sectoral Composition

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Fidelity Advisor Latin America Fund overview

The Fidelity Advisor Latin America Fund (FLFAX) seeks long-term capital growth by investing “at least 80% of assets in securities of Latin American issuers and other investments that are tied economically to Latin America.” The fund can invest up to 35% of its total assets in any industry that accounts for more than 20% of the Latin American market.

The fund’s management first conducts a fundamental analysis of securities based on their financial conditions and industry positions. It then also looks at market and economic conditions before finalizing its investments.

The fund’s assets were invested across 51 holdings in March 2016, down from 64 one quarter ago and 87 six months ago. It was managing assets worth $593.9 million as of August’s end.

In June, its equity holdings included Fibria Celulose (FBR), Grupo Supervielle (SUPV), Grupo Financiero Galicia (GGAL), Monsanto Company (MON), and Mercadolibre (MELI).

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Portfolio changes in the Fidelity Advisor Latin America Fund

Financials, consumer discretionary, and consumer staples are the core sectors in which FLFAX invests. Since our previous review in April, the consumer discretionary sector has overtaken consumer staples to become the fund’s second-largest sectoral holding. No other sector forms over one-tenth of the fund’s assets.

Compared to the MSCI EM Latin America Index, FLFAX is overweight the financials, consumer discretionary, industrials, healthcare, and information technology sectors. Meanwhile, it’s sharply underweight the materials, energy, utilities, and telecommunications services sectors.

We’ve looked at FLFAX’s quarterly portfolios for the past three years leading up to June 2016. The sharp rise in the fund’s consumer discretionary holdings in the past two quarters is a notable change. The sector formed under 5% of the fund’s portfolio three years ago, but now it forms 17%, up from 9.7% at the end of 2015.

On the other hand, the consumer staples sector has seen its portfolio weight fall quite substantially. At the end of 2015, staples commanded over one-quarter of FLFAX’s assets. Since then, its weight has fallen to 16%.

FLFAX’s exposures to the energy, telecommunications services, and materials sectors have fallen sharply, while its exposures to the financials, industrials, and healthcare sectors have seen sizable increases over the above-mentioned period.

Have these drastic portfolio changes helped FLFAX year-to-date? Let’s discuss this in the next article.

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