When I look for Fidelity mutual funds with strong potential for returns, the Zacks Rank system provides a useful signal. The Zacks Rank is a quantitative model that rates stocks and funds based on earnings estimate revisions and other factors, with Rank 1 representing “Strong Buy” candidates. Using this rank helps me identify funds managed by Fidelity that show strong momentum and positive analyst sentiment.
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What Is the Zacks Rank?
The Zacks Rank evaluates stocks and mutual funds based on earnings estimate revisions, earnings surprises, and other fundamental factors. It assigns a rank from 1 to 5:
- 1: Strong Buy
- 2: Buy
- 3: Hold
- 4: Sell
- 5: Strong Sell
Rank 1 funds are expected to outperform over the next 1-3 months, making them attractive for investors looking for momentum.
1. Fidelity Contrafund (FCNTX)
The Fidelity Contrafund stands out as a flagship large-cap growth fund that has earned the Zacks Rank 1 due to its solid earnings momentum and consistent stock picking. The fund focuses on companies with sustainable competitive advantages and growth potential.
Fund Highlights:
- Focus: Large-cap growth
- Top Sectors: Technology, Consumer Discretionary, Healthcare
- 10-Year Annualized Return: Approximately 13.8%
- Expense Ratio: 0.85%
This fund invests heavily in market leaders like Apple, Microsoft, and Amazon. Its managers monitor earnings revisions closely, aligning well with the Zacks methodology. For example, when Apple’s earnings estimates improve, Contrafund’s allocation often increases, benefiting from the upward momentum.
2. Fidelity Blue Chip Growth Fund (FBGRX)
Another top-ranked Fidelity fund under the Zacks Rank 1 is the Blue Chip Growth Fund. This fund targets large, established companies with strong earnings growth records and market dominance. Its disciplined approach to selecting high-quality stocks aligns with the Zacks Rank’s emphasis on earnings surprises and revisions.
Fund Highlights:
- Focus: Large-cap growth, blue-chip stocks
- Top Holdings: Alphabet, Facebook (Meta), Visa
- 10-Year Annualized Return: Approximately 14.5%
- Expense Ratio: 0.79%
The fund’s focus on companies with consistently rising earnings estimates fits perfectly with Zacks Rank 1 signals. The managers’ research-driven process ensures the portfolio maintains exposure to firms with improving fundamentals.
3. Fidelity Select Technology Portfolio (FSPTX)
The Fidelity Select Technology Portfolio focuses exclusively on technology companies, a sector known for rapid earnings growth and volatility. This fund often leads the pack in Zacks rankings when tech earnings show strong upward revisions.
Fund Highlights:
- Focus: Technology sector
- Top Holdings: Nvidia, Adobe, Microsoft
- 10-Year Annualized Return: Approximately 17.2%
- Expense Ratio: 0.70%
Tech companies frequently report earnings surprises, creating favorable conditions for Zacks Rank 1 status. The fund capitalizes on this by overweighting companies with upward earnings momentum, which has driven its impressive long-term returns.
Comparison Table of the 3 Funds
| Fund Name | Focus Area | 10-Year Return | Expense Ratio | Top Holdings | Zacks Rank |
|---|---|---|---|---|---|
| Fidelity Contrafund (FCNTX) | Large-cap growth | 13.8% | 0.85% | Apple, Microsoft, Amazon | 1 |
| Fidelity Blue Chip Growth (FBGRX) | Large-cap growth | 14.5% | 0.79% | Alphabet, Meta, Visa | 1 |
| Fidelity Select Technology (FSPTX) | Technology sector | 17.2% | 0.70% | Nvidia, Adobe, Microsoft | 1 |
Why These Funds Make Sense Now
With US markets facing ongoing economic uncertainty, I find funds that combine strong earnings momentum with solid fundamentals especially appealing. The Zacks Rank 1 flags these Fidelity funds as having positive earnings revisions, indicating analysts expect upward surprises.
Earnings momentum often translates into price gains as investors and institutions rotate capital toward outperforming sectors and companies. These funds’ focus on growth and technology provides both capital appreciation potential and exposure to innovative market leaders.
Example Calculation: Impact of Earnings Revisions on Fund Performance
Suppose the average earnings estimate for a fund’s top holdings improves by 10% over a quarter, influencing stock prices. If the fund’s NAV before the revision is $50 and the earnings boost drives a 5% increase in NAV:
New,NAV = 50 \times (1 + 0.05) = 52.50If I invested $10,000, my investment grows to:
10,000 \times \frac{52.50}{50} = 10,500This simplified example shows how earnings momentum can translate to fund appreciation, which the Zacks Rank aims to capture.
Final Thoughts
I believe these three Fidelity mutual funds represent some of the best opportunities for growth-oriented investors seeking strong earnings momentum backed by rigorous analysis. The Zacks Rank 1 rating offers a data-driven perspective to complement qualitative research.
If you want, I can help you evaluate these funds’ fit in your portfolio or explore similar Zacks Rank 1 funds tailored to your risk profile and goals. Understanding the interplay of earnings revisions, market sentiment, and fund strategy will keep you ahead in investing.
