Tough Times for FAIDX So Far in 2016


Sep. 7 2016, Updated 7:04 p.m. ET

Performance evaluation of the Fidelity Advisor International Discovery Fund

As of August’s end, 2016 has been a horrible year for the Fidelity Advisor International Discovery Fund Class A (FAIDX). It stands dead last among the 12 funds chosen for this review. The one-year period isn’t much better. The fund is next-to-last among its peers in terms of returns.

We’ve graphed the fund’s performance against the iShares MSCI ACWI ex U.S. ETF (ACWX) and the iShares MSCI EAFE ETF (EFA). Let’s look at what’s contributed to this terrible performance in 2016 so far.

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Contributions to returns

The financials sector has been the biggest drag on FAIDX so far in 2016. Mitsubishi UFJ Financial Group (MTU) and Credit Suisse (CS) have led the sector down. However, the sector has been saved from further blushes by Partners Group Holding, HDFC Bank (HDB), MSCI (MSCI), and S&P Global (SPGI), among others, which have greatly reduced the sector’s overall negative contributions.

The healthcare sector has also been responsible for FAIDX’s poor showing. Teva Pharmaceutical (TEVA) has been detrimental to the sector, along with Novo Nordisk (NVO) and Novartis (NVS). Meanwhile, Next and a host of other stocks have led the consumer discretionary sector into negative territory. If not for positive contributors such as Sony (SNE), the sector would be doing even worse.

While the consumer discretionary sector has been in the red, consumer staples stocks have helped to reduce some of these losses. Japan’s Tsuruha Holdings and the United States’ Constellation Brands (STZ) have been key positive contributors. Helping out consumer staples are industrials and information technology stocks. VINCI has held industrials up, but the sector has been hurt by negative contributions from Howden Joinery Group and AerCap Holdings (AER), among others. Meanwhile, Nintendo (NTDOY) and SAP (SAP) have led in the technology sector.

Investor takeaway

FAIDX is having a tough time navigating through 2016. Though the fund’s holdings are quite diverse, its stock picks have provided no cause for celebration. The fund’s picks from the consumer discretionary and healthcare sectors have performed particularly poorly. Its portfolio turnover is also quite high.

Existing investors should evaluate whether liquidating some of their holdings in FAIDX and reinvesting elsewhere could be a better option than holding on to the fund at this time.

Now, let’s move on to the Fidelity Diversified International Fund (FDIVX).


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