Big Bet on FSPTX

[ATXFIRE2034]

I bet big on FSPTX today...dropped $105k. I'm bullish that this technology sector fund will continue it's meteoric rise with largest positions in AAPL and MSFT. Does anyone else own a relatively large position in this mutual fund?

 

[leftyfrizzell1963]

Morningstar has 4 stars. I'll jump in too...but not quite as deep as you.

 

[MRG]

No it's had an awesome run. Can it go higher or revert? IDK, look at the top holdings APPL, MSFT, V..... GOOG. They're all in every index equity fund too, much cheaper that way. I've consolidated most of my side bets and figure I'll just be average.

I have a different problem though. I still own a good amount of APPL shares and have enjoyed this runup almost too much. I'm having to keep convincing myself to keep holding 450 shares I bought at $76, I've already sold half the position to more than cover my investment. The other remaining large equity position I have is GOOG, far fewer shares that were on sale at $420. Like APPL that investment was long ago paid for. I guess that's a first class problem

 

[nwsteve]

For a bit of perspective, suggest a quick review of this article from CNBC today--4 tech stocks now represent 18% of market's capitalization--the highest in history.
https://www.cnbc.com/2020/01/13/five-biggest-stocks-dwarfing-the-market-at-unprecedented-level.html
Nothing says they cant keep rising but....just how big of bet do you reall want?

 

[Montecfo]

In my opinion it seems a dubious time to make that particular investment.

I own many of those stocks but do not need a heavier allocation to US tech at the moment.

 

[target2019]

In my opinion it seems a dubious time to make that particular investment.

I own many of those stocks but do not need a heavier allocation to US tech at the moment.

Interesting time to tilt tech...

 

[24601NoMore]

Looks like the fund has posted solid performance #s, but that also looks to be under an old manager who isn't running the fund any longer.

New manager seems to have been at the helm since only 1/2019 FWIW..

Tech does seem very pricey at the moment..I still have a handful of shares of my old company stock and am wondering pretty much daily how much more room things have to "melt up"..

 

[ATXFIRE2034]

I know I'm taking a risk and I am comfortable with it given my long time horizon (another 17 years). I also work in the tech industry. I also know there seems to be a lot of negativity around "big tech" these days but the difference between general sentiment versus the industry continuing to outperform is legislative / political (regulation / administration) in nature for at least the next ~5 years IMO. Layer in the war for the cloud, digital service innovation and the explosion of data on top of that, I think you have a case for continued growth and dominance by these companies well into the 2020's.

 

[MichaelB]

I know I'm taking a risk and I am comfortable with it given my long time horizon (another 17 years). I also work in the tech industry. I also know there seems to be a lot of negativity around "big tech" these days but the difference between general sentiment versus the industry continuing to outperform is legislative / political (regulation / administration) in nature for at least the next ~5 years IMO. Layer in the war for the cloud, digital service innovation and the explosion of data on top of that, I think you have a case for continued growth and dominance by these companies well into the 2020's.

I have no opinion on the investment described in the OP but do want to point out that risk is more concentrated when your employment is in the same sector as your investment. An unexpected downturn could affect job and portfolio at the same time.

 

[phil1ben]

I still own a good amount of APPL shares and have enjoyed this runup almost too much. I'm having to keep convincing myself to keep holding 450 shares I bought at $76, I've already sold half the position to more than cover my investment. The other remaining large equity position I have is GOOG, far fewer shares that were on sale at $420. Like APPL that investment was long ago paid for. I guess that's a first class problem

My basis is lower and my position larger. Initial purchase was in 2008 and added to my position. I have never sold any of my shares. Thought about it many times and if I did (as you know) it would have been a mistake. However, $317.00/share makes me really think. I only own individual stocks and individual bonds - no mutual funds. The run-up has been incredible. The simple answer is -- sell some....perhaps 20%. But that reminds me when I asked my friend (Wall Street Portfolio Manager) what he thought about AAPL stock in 2001 when the IPOD first came out. His response in 2001 was: "AAPL is a computer company, do you think a consumer electronic will really move the needle?" I don't let him forget it. A FA would have said sell half long ago--to my detriment. I don't use FAs.

However stocks are only 25% of my portfolio but AAPL has become 16% of my stock portfolio. Its got me thinking.......

 

[ATXFIRE2034]

I think about AAPL this way, their rise has largely been on the back of hardware innovation and they have a massive install base now as a result of that which continues to grow. Their pivot into digital services (high margin) is early days IMO and with an install base that large to take advantage of on top of continued hardware innovation...they're clearly in a position for continued growth assuming the consumer remains strong. We haven't even seen how they'll eventually transform healthcare (wearables) play out and that is another very large opportunity for them.

My basis is lower and my position larger. Initial purchase was in 2008 and added to my position. I have never sold any of my shares. Thought about it many times and if I did (as you know) it would have been a mistake. However, $317.00/share makes me really think. I only own individual stocks and individual bonds - no mutual funds. The run-up has been incredible. The simple answer is -- sell some....perhaps 20%. But that reminds me when I asked my friend (Wall Street Portfolio Manager) what he thought about AAPL stock in 2001 when the IPOD first came out. His response in 2001 was: "AAPL is a computer company, do you think a consumer electronic will really move the needle?" I don't let him forget it. A FA would have said sell half long ago--to my detriment. I don't use FAs.

However stocks are only 25% of my portfolio but AAPL has become 16% of my stock portfolio. Its got me thinking.......

 

[jim584672]

0.72% expense ratio, ouch.

 

[UnrealizedPotential]

The first thing I look for is the downside. What is the possible downside of this investment? It can be ugly. In 2000 the fund was minus 32.30%, in 2001 the fund was minus 31.70%, and in 2002 the fund was minus 37.79%. Ouch! in 2008 the fund was minus 51.09%.

I wish the OP well with this investment. However, I have been burned before with the technology sector and it's just when things look their rosiest that impending doom is possibly lurking in the shadows.

 

[Montecfo]

However stocks are only 25% of my portfolio but AAPL has become 16% of my stock portfolio. Its got me thinking.......

I started looking at AAPL for first time in 2000-01. As I remember it was around $16 (or a little over $2 after the subsequent 7 for1 stock split). The company was on its heels. Then it rallied to 24 (around $3 post-split) and I figured I had missed it

Then I began trading it when it went over 100. I would sell after 20-30 pct gain. Eventually I established some longer term positions

At highs I have trimmed to just my lowest basis position but it is still pretty large for me but nothing like 16% as I limit individual positions to no more than 5% Basis is at $20 so it is hard to sell but I am well diversified.

You might want to trim or establish stops.

 

[OldShooter]

Morningstar has 4 stars. I'll jump in too...

It's very important to understand what those stars mean. For example, the top 10% of funds in the absolutely lowest performing Morningstar category get 5 stars. For years, Morningstar let investors believe that those stars had some kind of predictive value. Recently the WSJ reported (fall of 2018 IIRC) on a big analysis they had done showing that the predictive value of the stars is nil. After that, Morningstar has become a little more forthcoming on the subject: </FONT>Caveats (The link display is goofy but it works)

... it's just when things look their rosiest that impending doom is possibly lurking in the shadows.

Exactly. Reversion to the mean is an example.

SEC Rule 156 requires mutual funds to tell investors not to base their expectations of future results on past performance. There is a reason for this. Past performance is not predictive. Here is a chart I use in my Adult-Ed investing class:

​

(I have posted this before. Apologies to those who are bored.) This is based on one of S&P's semiannual Manager Persistence Report Cards. They are all the same -- only the percentages jitter a little bit.

On the left is a bar chart ranking the 5-year performance of thousands of mutual fund managers. The best, the top/green quintile, were then evaluated after another five years to see how they did. Any questions?

 

[NW-Bound]

I do not hold AMZN and AAPL, but have had quite a bit of gain on other tech stocks. They have been going up like mad. Buy, buy, buy...

I am starting to feel a bit uneasy about this. The last time I felt really uncomfortable with having such good gains was in early 2000.

 

[OldShooter]

I do not hold AMZN and AAPL, but have had quite a bit of gain on other tech stocks. They have been going up like mad. Buy, buy, buy...

I am starting to feel a bit uneasy about this. The last time I felt really uncomfortable with having such good gains was in early 2000.

IMO most of this class of stocks, including Tesla, are being bought on the greater fool theory, which works really well until it doesn't. (https://en.wikipedia.org/wiki/Greater_fool_theory)

 

[bingybear]

large?

 

[leftyfrizzell1963]

FTEC seems to be a similar type vehicle by Fidelity, but is an ETF, and not a mutual fund. Can OP say what the differences are and why the mutual fund was chosen over the ETF?

 

[Running_Man]

IMO most of this class of stocks, including Tesla, are being bought on the greater fool theory, which works really well until it doesn't. (https://en.wikipedia.org/wiki/Greater_fool_theory)

Tesla is getting squeezed up because it was the largest shorted stock and a short squeeze is good for the stock holders.

APPLE, MICROSOFT and the tech sector are basically being helped by INDEXING as they are in all the most favorite indexes. The two largest stocks in the INDEX FUND FTEC - APPLE and Microsoft make up 31% of the FTEC index and 10% of the S&P500 and 8.5% of the total stock market index.

But there are plenty of other technology indexes that are also on the favored status and by default as their popularity soars the total market index becomes more and more tilted to the most popular index sector - in 2007 it was financials that were the favored index - remember KBW KRE (25% of S&P500 in 2007 fell to 11% by 2009) in 2020 it is technology-- 5% in 1991 21% today - was 14% in 2009 and 35% in 2000 with the Y2K boom, so there is room for tech.

And as these sector funds soar in popularity it forces new investor money in the total index funds to allocate a larger percentage of their holdings to the most popular sectors.

As an aside since 2005 Investors business daily has developed an index called LEADERS INDEX FUND which is based on the best performing by relative strength of various index sectors.

 

[ATXFIRE2034]

I actually ended up cancelling my FSPTX order and going FTEC! Similar holdings / results with lower fees and it's an ETF.

FTEC seems to be a similar type vehicle by Fidelity, but is an ETF, and not a mutual fund. Can OP say what the differences are and why the mutual fund was chosen over the ETF?

 

[Qs Laptop]

I own FSPTX. Started with $7,500 in February 2018 when I opened my accounts at Fidelity. It's now at $10,900. Annualized return of 23.7%. VFINX return over that time frame was 11.5%. So VFINX was half the return.

Which of the anti-sector naysayers on this thread think technology is going to go away? LOL.

When Apple unveils their new iPhone with 5G technology all the drooling Apple fanboi's will stampede to the Apple stores and trade in their iPhone 6, 7, 8, 9 and 10's because they will absolutely must have the latest gizmo from Apple. Then watch the stock price of Apple.

Apple is the #1 holding in FSPTX.

Microsoft, Visa, MasterCard, and Adobe follow.

I get a kick out of watching the price of APPL vs. MA. They are quite close and I keep thinking AAPL will pull away, but MA keeps surprising.