Fidelity MSCI Industrials ETF: Capitalizing on Economic Recovery

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If you believe in America’s ability to recover from the one-two punch of the pandemic and ensuing recession, you should have faith in the industrial sector. Railways, large-equipment manufacturers, delivery services and the like are poised to wake from their 2020 slumber. The industrial sector suffered a 6.9% loss through the end of October, but then bounced higher on hopes of a vaccine-propelled rebound in economic growth and possibly increased infrastructure spending.

Fidelity MSCI Industrials Index ETF (FIDU), a member of the Kiplinger ETF 20 list of our favorite ETFs, isn’t the oldest fund invested in the sector, nor is it the largest. But charging just $8 annually for each $10,000 invested, it is the cheapest. And that eight bucks a year buys you a robust, diversified portfolio. FIDU holds more than 330 stocks, including top weightings in railroad Union Pacific (UNP), diversified conglomerate Honeywell (HON) and United Parcel Service (UPS).

Many holdings are large, global operators that could enjoy the benefits of economic snapbacks across the world, especially in resurgent China. However, FIDU could be an especially potent performer as the U.S. economy gets back on track. Midsize and small companies, which are likely to derive more of their revenues domestically, make up a larger percentage of the Fidelity fund’s portfolio than they do in many of its biggest competitors. The tilt toward smaller companies provides a “growthier” edge for the ETF, which nonetheless offers investors below-average risk, according to investment research firm Morningstar.

As of November 6. *Assumes reinvestment of dividends and capital gains. —Not applicable; fund not in existence for the entire period. Sources: Direxion, Morningstar, Yahoo Finance.