With grow stocks on torrid paces and the active non-transparent (ANT) ETFs structure taking flight, advisors may want to have a look at the Fidelity Blue Chip Growth ETF (FBCG).
FBCG is one of three ANTs launched by Boston-based Fidelity in June. The growth ANT will normally invest primarily in equity securities of companies that the Adviser believes have above-average growth potential (stocks of these companies are often called “growth” stocks). The Adviser normally invests at least 80% of the fund’s assets in blue-chip companies (companies that, in FMR’s view, are well-known, well-established, and well-capitalized), which generally have large or medium market capitalizations.
The three new ETFs are available commission-free to individual investors and financial advisors through Fidelity’s online brokerage platforms. The active equity ETFs are competitively priced with total expense ratios of 0.59% each and will utilize the same portfolio managers and research teams as their like-named mutual funds.
Considering it’s a new product with a new structure, FBCG is off to an impressive start with nearly $76 million in assets under management. The fund attempts to beat the widely observed Russell 1000 Growth Index.
FBCG could prove well-timed because the growth factor can actually perform well late in the business cycle. Investors can still enhance their portfolios as the bull market extends with growth-oriented stocks that continue to perform despite the recent bouts of volatility. The growth style has outperformed the market in spite of being prone to sell-offs with strong corporate earnings.
While the fund’s roster isn’t yet available, a hallmark of ANTs, it’s reasonable to expect the new Fidelity ETF is overweight technology, communication services, and consumer discretionary stocks because those are the sectors nearly all growth funds, regardless of structure, favor.
Growth stocks are often associated with high-quality, prosperous companies whose earnings are expected to continue increasing at an above-average rate relative to the market. Growth stocks generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. Still, data suggest the growth/value premium isn’t overly elevated relative to historical norms.
Growth stocks may be seen as exorbitant and overvalued, causing some investors to favor value stocks, which are considered undervalued by the market. Value stocks tend to trade at a lower price relative to their fundamentals (including dividends, earnings, and sales). While they generally have solid fundamentals, value stocks may have lost popularity in the market and are considered bargain priced compared with their competitors.