The Fidelity Advisor Emerging Europe, Middle East, Africa (EMEA) Fund Is Ruling The Emerging Market Space

| About: Fidelity® Emerging (FIEMX)

Summary

The Fidelity Advisor® Emerging Europe, Middle East, Africa (EMEA) Fund Inst is the top fund in the diversified emerging markets category with a 17.73% YTD Return.

The fund has been boosted by some good performances within the poor-performing financial services sector.

The fund ultimately benefits from tremendous exposure to Emerging Europe and the Middle East/Africa Region. These emerging market regions have performed well as evidenced by the performance of their ETFS.

Right now, the Fidelity® Emerging Europe, Middle East, Africa (EMEA) Fund Inst (MUTF:FIEMX) is the top fund in the diversified emerging market category with a 17.73% YTD Return. This total has surpassed the YTD Returns of the S&P 500 and the Diversified Emerging Markets Category, which are 2.49% and 6.29% respectively.

If I were to describe the fund in terms of market capitalization statistics, it has market capitalization weighting like no other fund so it can have the results of no other fund in the diversified emerging market space.

The fund has a massive portfolio weighting deficit in terms of giant-cap stocks compared to its benchmark and category average. However, the fund has a tremendous advantage in terms of mid-cap stock holdings as well as a pretty sizable advantage for small-cap stock holdings. The results can be seen below:

Size

% of Portfolio

Benchmark

Category Avg.

Giant

18.96

57.50

59.22

Large

29.24

31.46

21.34

Medium

33.62

10.65

15.56

Small

12.27

0.40

3.81

Micro

5.91

0.00

0.07

Another piece of good news can be seen in the fund's value and growth measures. The fund is undervalued in all of its price multiples and has the additional advantage of offering a dividend yield that is better than its benchmarks. This can be seen below.

Price Multiple

% Stock Portfolio

Benchmark

Category Avg.

Price/Prospective Earnings*

11.09

12.06

12.83

Price/Book*

1.04

1.26

1.53

Price/Sales*

0.88

1.10

1.27

Price/Cash Flow*

3.39

3.93

4.63

Dividend Yield %*

3.94

3.30

3.19

In terms of sector weightings, one can immediately see that the fund has a portfolio weight advantage in the poor-performing financial services sector. This may not seem like a good sign on paper, especially given that the financial services sector is the worst performing sector among foreign sector and global sector ETFs. The iShares Global Financials ETF (NYSEARCA:IXG) has a -2.6% YTD Return and the SPDR S&P International Financial Sector ETF (NYSEARCA:IPF) has a -6.0% YTD Return. Here is the fund's portfolio weight statistics in terms of financial services.

Sector

FIEMX Stock Portfolio

Benchmark

Category Average

Financial Services

30.07

23.91

22.61

In actuality, the fund's financial services holdings have not dragged down the fund by any stretch. The following chart shows all of the fund's financial service holdings listed among the fund's top 25 holdings. For the most part, the results have been quite positive.

FINANCIAL SERVICE HOLDING

PORTFOLIO WEIGHT

YTD RETURN

Sberbank of Russia PJSC

4.95%

33.69

Remgro Ltd

2.60%

3.32

Firstrand Ltd

2.47%

7.20

OTP Bank PLC

2.20%

16.70

Banca Transilva SA

1.61%

20.94

Qatar National Bank SAQ

1.55%

-0.91

Standard Bank Group Ltd

1.32%

14.33

BRD-Groupe Societe Generale SA

1.27%

-19.58

While the basic materials sector consists of less than 10% of the fund, the sector contains five out of the fund's top 10 holdings with regards to YTD Return. Here are all of the fund's basic materials holdings:

BASIC MATERIALS HOLDINGS

YTD RETURN

DRDGold Ltd

229.50%

Anglogold Ashanti Ltd

140.44%

Northam Platinum Ltd

52.10%

African Rainbow Minerals Ltd

93.12%

Detour Gold Corp

104.02%

Wienerberger AG

-15.10%

Hulamin Ltd

-3.53%

Osisko Gold Royalties Ltd

18.80%

Exxaro Resources Ltd

48.39%

Additionally, this fund has the added benefit of being in two high-performing emerging market regions. This can be seen in the performances of the emerging market regional ETFs in Emerging Europe and the Emerging Middle East/Africa. The SPDR S&P Emerging Europe ETF (NYSEARCA:GUR) has a 17.7% YTD Return and the SPDR S&P Emerging Middle East & Africa ETF (NYSEARCA:GAF) has a 16.4% YTD Return. As you can see below, the fund has a significant advantage in these two regions in terms of portfolio weight.

Region

FIEMX Stock Portfolio

Benchmark

Category Average

Europe Emerging

40.13

7.10

8.41

Africa/Middle East

52.47

9.01

8.05

In terms of expense ratio, the fund can be considered affordable.

As of the prospectus on 12/30/2015, the fund's expense ratio is 1.25. The expense ratio for the Fidelity® Emerging Europe, Middle East, Africa (EMEA) Fund Inst has remained pretty steady for the past few years.

However, the average expense ratio of the Morningstar category average and fee level group comparison median has become cheaper over the past few years. Here is the fund's expense ratio in comparison to its benchmark for the last few years.

Conclusion

This Fidelity® Emerging Europe, Middle East, Africa (EMEA) Fund is worth the investment as it is heavily exposed to the high-performing emerging market regions of Middle East/Africa and Emerging Europe.

This has clearly boosted the fund's performance. In addition, the fund has more potential growth ahead due to the undervaluation of all its price multiples.

In addition, the fund's performance has been boosted by some good holdings in a poor-performing financial services sector and tremendous performances in the basic materials sector.

Most importantly, the fund has been readily affordable for a while now. This should be music to the ears of investors.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

About this article:

Expand
Author payment: $35 + $0.01/page view. Authors of PRO articles receive a minimum guaranteed payment of $150-500. Become a contributor »
Problem with this article? Please tell us. Disagree with this article? .