QUARTERLY FUND REVIEW AS OF MARCH 31, 2018 Fidelity Select Consumer Discretionary Investment Approach Fidelity Select Consumer Discretionary is a sector-based, equity-focused strategy that seeks to outperform its benchmark through active management. The fund is constructed to maximize ownership of companies with characteristics that we believe should drive outperformance: a tailwind from improving consumer macro trends; market-share gains; a technology lead relative to peers; improving margins; increasing returns of capital to shareholders; and reasonable valuation. We look to invest when the stock prices do not yet reflect our higher-than-consensus expectations for long-term earnings growth. Position sizes and fund concentration are a function of our conviction level in our investment ideas, weighed against the probability of upside to a stock's intrinsic (fair) value and the time horizon needed to capture it. Stock selection and idea generation come from bottom-up research that leverages Fidelity's deep and experienced global consumer team. We consider attractive consumer stocks outside of the benchmark that offer the potential for favorable risk-adjusted returns. Sector strategies could be used by investors as alternatives to individual stocks for either tacticalor strategic-allocation purposes. PERFORMANCE SUMMARY Cumulative 3 Month YTD 1 Year Annualized 3 Year 5 Year 10 Year/ LOF 1 Select Consumer Discretionary Gross Expense Ratio: 0.76% 2 2.73% 2.73% 17.49% 9.80% 13.96% 12.65% S&P 500-0.76% -0.76% 13.99% 10.78% 13.31% 9.49% MSCI US IMI Consumer Discretionary 25/50 1.98% 1.98% 16.02% 10.74% 14.93% 14.14% Morningstar Fund Consumer Cyclical -0.39% -0.39% 14.13% 6.45% 11.09% 11.08% % Rank in Morningstar Category (1% = Best) -- -- 19% 30% 23% 27% # of Funds in Morningstar Category -- -- 50 46 45 35 1 Life of Fund (LOF) if performance is less than 10 years. Fund inception date: 06/29/1990. 2 This expense ratio is from the most recent prospectus and generally is based on amounts incurred during the most recent fiscal year. It does not include any fee waivers or reimbursements, which would be reflected in the fund's net expense ratio. Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance stated. Performance shown is that of the fund's Class shares (if multiclass). You may own another share class of the fund with a different expense structure and, thus, have different returns. To learn more or to obtain the most recent month-end or other share-class performance, visit fidelity.com/performance, institutional.fidelity.com, or 401k.com. Total returns are historical and include change in share value and reinvestment of dividends and capital gains, if any. Cumulative total returns are reported as of the period indicated. For definitions and other important information, please see the Definitions and Important Information section of this Fund Review. FUND INFORMATION Manager(s): Katherine Shaw Trading Symbol: FSCPX Start Date: June 29, 1990 Size (in millions): $795.24 Morningstar Category: Fund Consumer Cyclical The value of the fund's domestic and foreign investments will vary from day to day in response to many factors. Stock values fluctuate in response to issuer, political, regulatory, market, or economic developments. You may have a gain or loss when you sell your shares. Investments in foreign securities, especially those in emerging markets, involve risks in addition to those of U.S. investments, including increased political and economic risk, as well as exposure to currency fluctuations. Because FMR concentrates the fund's investments in a particular industry, the fund's performance could depend heavily on the performance of that industry and could be more volatile than the performance of less concentrated funds and the market as a whole. The fund is considered nondiversified and can invest a greater portion of assets in securities of individual issuers than a diversified fund; thus changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a more diversified fund. The consumer discretionary industries can be significantly affected by the performance of the overall economy, interest rates, competition, consumer confidence and spending, and changes in demographics and consumer tastes. Not FDIC Insured May Lose Value No Bank Guarantee
Market Review Consumer discretionary stocks, as measured by the MSCI U.S. IMI Consumer Discretionary 25/50, advanced 1.98% for the first quarter, ahead of the -0.76% result of the broad market S&P 500 index. Overall, positive business and consumer sentiment continued to provide a supportive backdrop for the sector. Jobs data also trended positive, as a tight labor market, low unemployment, and wage growth supported the U.S. consumer and continued overall economic expansion. Investors remained positive that the sweeping $1.5 trillion tax reform plan was passed in December could boost consumers' discretionary spending in 2018. A marked jump in holiday spending, which typically accounts for more than one quarter of annual retail sales, was a boon for the financials results of many retailers. Nevertheless, fierce retail competition hurt profit margins for some companies, while changing consumer preferences also challenged some of the sector's industries. Among notable outperformers, internet & direct marketing retail (+25%) and department stores (+16%) achieved the strongest results. Shares of e-commerce giant Amazon.com gained 24% for the first quarter, while clothing department store chain Kohl's advanced 22% both benefiting from solid earnings results. The footwear industry (+6%) was lifted in part by athletic shoe and apparel giant adidas. The stock rose in March after the firm reported a rise in fiscal year 2017 profits and upgraded its 2020 profitability target. Apparel, accessories & luxury goods (+5%) was another outperforming industry. Here, PVH owner of brands such as Tommy Hilfiger and Calvin Klein rose on better-than-expected revenue owed to renewed strength of both brands, as well as a strong outlook for 2018. Conversely, automobile manufacturers (-12%) and homebuilding (- 11%) were significant industry laggards. Automakers lagged as they faced the potential of China-imposed tariffs on U.S. automobiles, while homebuilders were hurt by three consecutive months of declining new home sales. Performance Review The fund advanced 2.73% for the quarter ending March 31, 2018, outperforming the 1.98% return of the benchmark MSCI U.S. IMI Consumer Discretionary 25/50. Positioning in internet & direct marketing retail, along with an underweighting in automobile manufacturers helped the most. Stock picks in general merchandising stores detracted. In terms of individual stocks, our largest holding this quarter also was our biggest contributor: Amazon.com. Shares of Amazon gained 24%, rising largely due to the company's sustained dominance in its core e-commerce and cloud markets. In early February, the firm announced fourth-quarter financial results that far exceeded expectations, including a notable revenue boost from Whole Foods Market, acquired in August, and strong holiday sales. Amazon Web Services (AWS) remained a prominent growth driver, generating 64% of the company's operating income for the fourth quarter. The stock tumbled in late March after President Trump publicly criticized the company, claiming it paid too little in taxes, takes advantage of the postal service and generally hurts other retailers. Elsewhere, underexposure to index component Comcast was another positive. Still, the stock was one of our biggest holdings, on average. Shares of the media giant returned roughly -14% the past three months. The stock's quarterly decline occurred after the company announced a bid to purchase European pay-tv giant Sky to expand its operations abroad, and was seen as a reflection of investors' view on the move. Industry analysts noted the company continued to face profit-margin pressure in its cable-tv operations from cord cutters those who opt out of their cable-tv subscription in favor of lower-priced video streaming or other services. Conversely, our big outsized stake in Dollar Tree was the fund's biggest individual detractor this quarter. The stock of the discount retailer returned roughly -12% the past three months, falling sharply in early March after the firm reported disappointing financial results for its fiscal quarter ending February 3 and lowered projections for the next quarter and full fiscal year. Revenue, earnings and samestore sales all improved on a year-over-year basis, but did not meet Wall Street analysts' expectations. LARGEST CONTRIBUTORS VS. BENCHMARK Amazon.com, Inc. Internet & Direct Marketing Average Contribution (basis points)* 0.85% 21 Comcast Corp. Class A Cable & Satellite -1.18% 20 General Motors Co. Automobile Manufacturers -1.27% 16 L Brands, Inc. Apparel -0.31% 15 Ford Motor Co. * 1 basis point = 0.01%. Automobile Manufacturers -1.15% 15 LARGEST DETRACTORS VS. BENCHMARK Dollar Tree, Inc. Charter Communications, Inc. Class A Home Depot, Inc. Performance Food Group Co. Twenty-First Century Fox, Inc. Class A * 1 basis point = 0.01%. General Merchandise Stores Average Contribution (basis points)* 2.50% -36 Cable & Satellite 1.89% -15 Home Improvement 1.62% -13 Food Distributors 0.80% -10 Movies & Entertainment -1.40% -7 2 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
Outlook and Positioning The economy continues to grow at a snail's pace, but we are bullish on consumer discretionary trends, given falling unemployment and rising wages that began in earnest a few years ago. The recently passed Republican-led tax-reform bill could add to U.S. gross domestic product, and further help consumer spending trends. This view also is supported by the recent upward moves in consumer and small-business confidence, as well as positive data points from industrial manufacturing. While we're optimistic, we have yet to see consumers' purse strings loosen much. Meanwhile, headwinds persist, including the rise in health care costs coupled with a more recent uptick in gas prices. The geopolitical backdrop also has gotten murkier. With all of this in mind, we are being very selective when choosing consumer discretionary stocks. We think valuations across the sector remain fairly high, and we don't see many undervalued opportunities. So, we intend to stick with our investment philosophy: choosing companies that we think stand to benefit from improving consumer macro trends, market-share gains, exposure to increasing consumer preferences and popularity, or a technology advantage versus competitors. We also like firms with improving profit margins and shareholder remuneration rates, as well as reasonable valuations. We believe these types of stocks should outperform over time, regardless of the backdrop. It's an interesting time for consumer discretionary investors. Various industries in the sector are undergoing a sea change, with retail and media the fastest to transition. Shopping patterns in the U.S. have been turned on their heads in the past decade, with mall-based stocks significantly underperforming those geared toward online shopping. Traditional media networks have declined amid the increasing pace of cord-cutting. However, we are optimistic about the potential for companies with the best content and strongest distribution networks to grow faster than the overall sector, especially when these firms demonstrate an ability to monetize content in multiple ways. Further, demand for faster internet connections should continue to rise as technology evolves. Another significant shift is occurring in the dining experience. New restaurant technology is allowing diners to order and pay ahead to avoid lines and lengthy wait times. Food delivery also is growing in importance; generational shifts among consumers point to greater outsourcing of that process. Also, the auto marketplace is undergoing a shift toward technologybased offerings, as in-car content and the potential for autonomous driving is becoming more of a reality. Although technology has changed the consumer landscape in many ways, something that has not changed is consumers' desire to participate in and share experiences. We're bullish on businesses that can bring consumers something special in terms of travel hotels, for example and experiences, such as skiing and gambling, among others. We're also positive on housing and home improvement. Millennials are just starting to purchase houses, the average stock of homes is over 30 years old and inventory turnover is low, creating a positive backdrop for both homebuilders and home improvement stocks. 10 LARGEST HOLDINGS Amazon.com, Inc. Home Depot, Inc. McDonald's Corp. The Walt Disney Co. Comcast Corp. Class A Netflix, Inc. Charter Communications, Inc. Class A Dollar Tree, Inc. The Booking s, Inc. Lowe's Companies, Inc. 10 Largest s as a % of Net Assets Total Number of s 145 Internet & Direct Marketing Home Improvement Restaurants Movies & Entertainment Cable & Satellite Internet & Direct Marketing Cable & Satellite General Merchandise Stores Internet & Direct Marketing Home Improvement 50.99% The 10 largest holdings are as of the end of the reporting period, and may not be representative of the fund's current or future investments. s do not include money market investments. CHARACTERISTICS Valuation Price/Earnings Trailing 28.9x 23.8x Price/Earnings (IBES 1-Year Forecast) 22.8x 19.3x Price/Book 6.1x 4.8x Price/Cash Flow 16.8x 14.1x Return on Equity (5-Year Trailing) 23.2% 20.1% Growth Sales/Share Growth 1-Year (Trailing) 13.7% 12.4% Earnings/Share Growth 1-Year (Trailing) 43.3% 33.2% Earnings/Share Growth 1-Year (IBES Forecast) 35.8% 33.8% Earnings/Share Growth 5-Year (Trailing) 22.1% 17.0% Size ed Average Market Cap ($ Billions) 186.5 174.2 ed Median Market Cap ($ Billions) 74.2 73.8 Median Market Cap ($ Billions) 11.2 2.5 3 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
LARGEST OVERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Hotels, Resorts & Cruise Lines 8.71% 4.20% 4.50% 0.30% Home Improvement 10.23% 8.06% 2.17% -0.44% Casinos & Gaming 4.08% 2.18% 1.90% -0.11% General Merchandise Stores 4.30% 2.53% 1.77% 0.24% Food Distributors 1.30% -- 1.30% -0.30% LARGEST UNDERWEIGHTS BY MARKET SEGMENT Change From Prior Quarter Movies & Entertainment 5.06% 9.43% -4.37% -0.25% Auto Parts & Equipment 0.20% 2.83% -2.63% 0.07% Automobile Manufacturers 2.25% 3.71% -1.46% 0.88% Cable & Satellite 6.86% 8.07% -1.21% -0.56% Broadcasting 0.13% 1.25% -1.11% 0.34% LARGEST OVERWEIGHTS BY HOLDING Dollar Tree, Inc. General Merchandise Stores 2.29% Charter Communications, Inc. Class A Cable & Satellite 1.51% Home Depot, Inc. Home Improvement 1.48% Hilton Worldwide s, Inc. Hotels, Resorts & Cruise Lines 1.24% Burlington Stores, Inc. Apparel 1.12% LARGEST UNDERWEIGHTS BY HOLDING Time Warner, Inc. Movies & Entertainment -1.56% Twenty-First Century Fox, Inc. Class A Movies & Entertainment -1.45% Ford Motor Co. Automobile Manufacturers -1.17% Comcast Corp. Class A Cable & Satellite -1.07% General Motors Co. Automobile Manufacturers -0.86% ASSET ALLOCATION Asset Class Change From Prior Quarter Domestic Equities 94.82% 97.66% -2.84% 0.09% International Equities 5.19% 2.34% 2.85% 0.45% Developed Markets 2.39% 1.05% 1.34% 0.48% Emerging Markets 2.80% 1.22% 1.58% 0.04% Tax-Advantaged Domiciles 0.00% 0.07% -0.07% -0.07% Bonds 0.00% 0.00% 0.00% 0.00% Cash & Net Other Assets -0.01% 0.00% -0.01% -0.54% Net Other Assets can include fund receivables, fund payables, and offsets to other derivative positions, as well as certain assets that do not fall into any of the portfolio composition categories. Depending on the extent to which the fund invests in derivatives and the number of positions that are held for future settlement, Net Other Assets can be a negative number. 3-YEAR RISK/RETURN STATISTICS Beta 1.01 1.00 Standard Deviation 12.02% 11.67% Sharpe Ratio 0.77 0.88 Tracking Error 2.52% -- Information Ratio -0.37 -- R-Squared 0.96 -- "Tax-Advantaged Domiciles" represent countries whose tax policies may be favorable for company incorporation. 4 For definitions and other important information, please see Definitions and Important Information section of this Fund Review.
Definitions and Important Information Unless otherwise disclosed to you, in providing this information, Fidelity is not undertaking to provide impartial investment advice, act as an impartial adviser, or to give advice in a fiduciary capacity. CHARACTERISTICS Earnings-Per-Share Growth measures the growth in reported earnings per share over the specified past time period. Median Market Cap identifies the median market capitalization of the portfolio or benchmark as determined by the underlying security market caps. Price-to-Book (P/B) Ratio is the ratio of a company's current share price to reported accumulated profits and capital. Price/Cash Flow is the ratio of a company's current share price to its trailing 12-months cash flow per share. Price-to-Earnings (P/E) Ratio (IBES 1-Year Forecast) is the ratio of a company's current share price to Wall Street analysts' estimates of earnings. Price-to-Earnings (P/E) Ratio Trailing is the ratio of a company's current share price to its trailing 12-months earnings per share. Return on Equity (ROE) 5-Year Trailing is the ratio of a company's last five years historical profitability to its shareholders' equity. Preferred stock is included as part of each company's net worth. Sales-Per-Share Growth measures the growth in reported sales over the specified past time period. ed Average Market Cap identifies the market capitalization of the average equity holding as determined by the dollars invested in the portfolio or benchmark. ed Median Market Cap identifies the market capitalization of the median equity holding as determined by the dollars invested in the portfolio or benchmark. IMPORTANT FUND INFORMATION positioning data presented in this commentary is based on the fund's primary benchmark (index) unless a secondary benchmark is provided to assess performance. Effective 8/3/17, Katherine Shaw became sole portfolio manager, while Peter Dixon transitioned off the fund. The Board of Trustees unanimously approved a proposal to shareholders for trustee election that would combine oversight of Fidelity's sector funds with Fidelity's broader equity and high income funds under a single Board of Trustees. If approved, the unified Board would be effective on or about 3/1/18. dividends and interest income unless otherwise noted. MSCI US IMI Consumer Discretionary 25/50 is a modified market-capitalization-weighted index of stocks designed to measure the performance of Consumer Discretionary companies in the MSCI U.S. Investable Market 2500. The MSCI U.S. Investable Market 2500 is the aggregation of the MSCI U.S. Large Cap 300, Mid Cap 450, and Small Cap 1750 Indices. S&P 500 is a market-capitalization-weighted index of 500 common stocks chosen for market size, liquidity, and industry group representation to represent U.S. equity performance. MARKET-SEGMENT WEIGHTS Market-segment weights illustrate examples of sectors or industries in which the fund may invest, and may not be representative of the fund's current or future investments. Should not be construed or used as a recommendation for any sector or industry. RANKING INFORMATION 2018 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or redistributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Fidelity does not review the Morningstar data and, for mutual fund performance, you should check the fund's current prospectus for the most up-to-date information concerning applicable loads, fees and expenses. % Rank in Morningstar Category is the fund's total-return percentile rank relative to all funds that have the same Morningstar Category. The highest (or most favorable) percentile rank is 1 and the lowest (or least favorable) percentile rank is 100. The topperforming fund in a category will always receive a rank of 1%. % Rank in Morningstar Category is based on total returns which include reinvested dividends and capital gains, if any, and exclude sales charges. Multiple share classes of a fund have a common portfolio but impose different expense structures. RELATIVE WEIGHTS weights represents the % of fund assets in a particular market segment, asset class or credit quality relative to the benchmark. A positive number represents an overweight, and a negative number is an underweight. The fund's benchmark is listed immediately under the fund name in the Performance Summary. At a shareholder meeting on 12/8/17, a proposal was approved to combine the oversight of Fidelity's sector funds with Fidelity's broader equity and high income funds under a single Board of Trustees. The unified Board will be effective on 3/1/18. INDICES It is not possible to invest directly in an index. All indices represented are unmanaged. All indices include reinvestment of 5
3-YEAR RISK/RETURN STATISTICS Beta is a measure of the volatility of a fund relative to its benchmark index. A beta greater (less) than 1 is more (less) volatile than the index. Information Ratio measures a fund's active return (fund's average monthly return minus the benchmark's average monthly return) in relation to the volatility of its active returns. R-Squared measures how a fund's performance correlates with a benchmark index's performance and shows what portion of it can be explained by the performance of the overall market/index. R- Squared ranges from 0, meaning no correlation, to 1, meaning perfect correlation. An R-Squared value of less than 0.5 indicates that annualized alpha and beta are not reliable performance statistics. Standard Deviation is a statistical measurement of the dispersion of a fund's return over a specified time period. Fidelity calculates standard deviations by comparing a fund's monthly returns to its average monthly return over a 36-month period, and then annualizes the number. Investors may examine historical standard deviation in conjunction with historical returns to decide whether a fund's volatility would have been acceptable given the returns it would have produced. A higher standard deviation indicates a wider dispersion of past returns and thus greater historical volatility. Standard deviation does not indicate how the fund actually performed, but merely indicates the volatility of its returns over time. Tracking Error is the divergence between the price behavior of a position or a portfolio and the price behavior of a benchmark, creating an unexpected profit or loss. Sharpe Ratio is a measure of historical risk-adjusted performance. It is calculated by dividing the fund's excess returns (the fund's average annual return for the period minus the 3-month "risk free" return rate) and dividing it by the standard deviation of the fund's returns. The higher the ratio, the better the fund's return per unit of risk. The three month "risk free" rate used is the 90-day Treasury Bill rate. Before investing in any mutual fund, please carefully consider the investment objectives, risks, charges, and expenses. For this and other information, call or write Fidelity for a free prospectus or, if available, a summary prospectus. Read it carefully before you invest. Past performance is no guarantee of future results. Views expressed are through the end of the period stated and do not necessarily represent the views of Fidelity. Views are subject to change at any time based upon market or other conditions and Fidelity disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Fidelity fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any Fidelity fund. The securities mentioned are not necessarily holdings invested in by the portfolio manager(s) or FMR LLC. References to specific company securities should not be construed as recommendations or investment advice. S&P 500 is a registered service mark of Standard & Poor's Financial Services LLC. Other third-party marks appearing herein are the property of their respective owners. All other marks appearing herein are registered or unregistered trademarks or service marks of FMR LLC or an affiliated company. Fidelity Brokerage Services LLC, Member NYSE, SIPC., 900 Salem Street, Smithfield, RI 02917. Fidelity Investments Institutional Services Company, Inc., 500 Salem Street, Smithfield, RI 02917. 2018 FMR LLC. All rights reserved. Not NCUA or NCUSIF insured. May lose value. No credit union guarantee. 656506.20.0 Diversification does not ensure a profit or guarantee against a loss.