Per the latest report by the Federal Reserve, U.S. industrial production rose to its highest level in the last three months in November. Gains were buoyed by a steady increase in utilities and mining output.
Also, the Institute for Supply Management (ISM) stated that its manufacturing index increased for the 115th month on the trot in November. Burgeoning manufacturing activity in the country indicates that the U.S. economy is gaining strength. Under such circumstances, investing in mutual funds having significant exposure to manufacturing and industrial companies seems prudent.
U.S. Industrial Production Strongest in 3 Months
U.S. industrial production increased 0.6% in November, surpassing the consensus estimate of 0.6%. This marked its strongest gain in the last three months. Further, the metric rose on the back of a surge in mining and utilities output. Moreover, the Federal Reserve sated that the 3.3% increase in utilities output was the result of severely cold temperatures across the country.
On the other hand, mining output climbed 1.7% on the back of robust production at coal mines, and oil and gas drillers. Finally, capacity utilization gained 0.4% last month to hit 78.5. This figure was a tad higher than October’s figure of 78.1.
Manufacturing Activity Rebounds in November
The ISM Manufacturing Index increased to 59.3% last month, 1.6% higher than the level of 57.7% registered in October, the lowest recorded in 18 months. A level above 50% implies that the manufacturing sector is expanding.
Such encouraging developments point toward the fact that American manufacturing continues to grow despite tariff pressures and labor shortage. This is in keeping with the broader economy, which grew at a 3.5% pace in the third quarter, per the latest estimate.
3 Best Funds to Buy Now
Given such positives, we have highlighted three mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Industrials Fund (FCYIX – Free Report) seeks capital appreciation. FCYIX normally invests a large portion of its assets in the common stock of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.
This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 8.5% over the three-year and 7.3% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FCYIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.18%.
Fidelity Select Transportation (FSRFX – Free Report) seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in the design, manufacture and sale of transportation equipment and provide transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.
This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 14.7% and 12.3% over the three-year and five-year benchmark, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSRFX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%, which is below the category average of 1.18%.
Fidelity Select Defense & Aerospace Portfolio (FSDAX – Free Report) invests a huge portion of its assets in securities of companies involved primarily in the research, manufacture and sale of products and services as per the defense or aerospace industries. The fund seeks capital growth by investing in both U.S. and non-U.S. companies.
This Sector – Other product has a history of positive total returns for over 10 years. The fund has returned 22.9% over the three-year and 17.7% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSDAX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.76%, which is below the category average of 1.18%.
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