A Fund for the Forces

Brokerage houses have yet to offer a mom and apple pie mutual fund, but Fidelity's defense sector fund might speak to investors looking for a play with patriotic returns.

The (FSDAX Quote)Fidelity Select Defense & Aerospace fund provides exposure to companies that may benefit from the U.S.' military and homeland security efforts, and its top 10 holdings include the big defense names you would expect, such as Raytheon(RTN Quote), General Dynamics(GD Quote), L-3 Communications(LLL Quote) and Lockheed Martin(LMT Quote).

While other funds, such as the (RCMFX Quote)Schwartz Value fund, are heavily weighted toward homeland security and defense companies, Morningstar points out that Fidelity's fund is the only one mandated to buy defense stocks, and thus provides a pure play on the sector.

The $970 million fund is a mid-cap growth play that gets a five-star rating from Morningstar and has posted a 2.69% return year to date vs. the S&P 500's 1.95% return.

Fidelity Defense and Aerospace also has seen a 22.67% return over three years, nearly double the S&P's 12.23% growth over the same period.

The fund is somewhat heavily weighted toward certain names -- its top five holdings equal about 30% of all assets.

"It's a specialty fund, so by design and mandate it will cover only a narrow set of stocks," says Deborah Pont, a spokeswoman at Fidelity. "One of the biggest advantages is that you don't have to deal with the cost of buying each security and having to monitor each one."

The defense sector has been on a tear, as evidenced by the fund's top three holdings: General Dynamics, Precision Castparts(PCP Quote) and Rockwell Collins(COL Quote).

General Dynamics has posted a 13.3% year-to-date return and is up 16.5% over the past 52 weeks. In that time, the S&P 500 has had just a 3.85% return. Precision Castparts has logged 6.89% since the beginning of 2006 and 38.87% over the past 52 weeks, while Rockwell has gained 17.02% year to date and 13.25% over the past full year.