This report provides an overview of the Fidelity Select Industrials Portfolio's performance and strategic positioning for the third quarter of 2025. The fund's investment strategy focuses on identifying a balanced mix of undervalued cyclical stocks and companies demonstrating consistent earnings growth across various economic cycles. Despite a strategic allocation to the aerospace and defense sectors, the fund's returns lagged behind both its specific industrial benchmark and the broader market index during this period. Investors will gain insight into the market conditions that influenced the fund's performance and the rationale behind its continued emphasis on key sectors for long-term growth.
Fund Performance and Market Conditions in Q3 2025
For the third quarter of 2025, the Fidelity Select Industrials Portfolio recorded a gain of 4.94%. This performance placed it below its primary benchmark, the MSCI U.S. IMI Industrials 25/50 Index, which advanced by 6.05%. Furthermore, the fund also trailed the broader market, as indicated by the S&P 500\u00ae index, which achieved an 8.12% gain over the same period. The disparity in returns highlights a challenging quarter for the fund relative to both its sector-specific peers and the overall market.
During the third quarter of 2025, the industrial sector, as measured by the MSCI U.S. IMI Industrials 25/50 Index, saw a gain of 6.05%. This rise, however, was outpaced by the broader S&P 500\u00ae index, which recorded an 8.12% increase. Against this backdrop, the Fidelity Select Industrials Portfolio delivered a return of 4.94%, falling short of both the industrial sector's average and the overall market's performance. The fund's strategic approach involves identifying undervalued cyclical businesses alongside more stable earnings generators to navigate various market phases. Despite this balanced methodology, the quarter's results suggest that specific market dynamics or stock selections within the portfolio did not fully capture the upward momentum observed in the wider market and its direct industrial benchmark. This underperformance prompts a closer examination of the factors influencing the fund's holdings and its sector allocation.
Strategic Sector Allocation and Future Outlook
As of the end of September, the Fidelity Select Industrials Portfolio maintained its most significant overweight position in the aerospace & defense sector. This allocation reflects the fund management's continued confidence in the robust prospects and long-term growth potential within this industry. The strategic decision to emphasize this sector is based on an ongoing positive assessment of its future performance and resilience.
At the close of September, the Fidelity Select Industrials Portfolio continued to hold a substantial overweight position within the aerospace and defense sector. This strategic emphasis is a clear indicator of the fund management's strong belief in the sector's long-term viability and growth trajectory. The decision to maintain this significant allocation stems from a comprehensive evaluation of the aerospace and defense industry, where analysts foresee sustained demand and robust financial performance. Factors contributing to this positive outlook typically include ongoing technological advancements, government spending on defense initiatives, and the gradual recovery of global travel, which benefits commercial aerospace. Despite the fund's trailing performance in Q3 2025, this continued overweight signals a strategic conviction that the aerospace and defense sector will be a key driver of future returns, aligning with the fund's objective of blending undervalued cyclical opportunities with consistent earnings growth throughout different economic cycles.