3 Mutual Funds to Ride the Surge in Industrial Production – January 25, 2019

Per the latest report by the Federal Reserve on Jan 18, industrial production rose to its highest level in the last 10 months. Manufacturers have increased capital spending and hiring driven by massive tax overhaul, deregulation, strong domestic economy and upbeat business sentiment.

Under such circumstances, investing in mutual funds having significant exposure to the manufacturing and industrial companies seems prudent.

U.S. Industrial Production Hits 10-Month High

Industrial production in the United States increased 1.1% for the month of December, marking its 116th straight month of gains. Over the last 12 months, the average value of the manufacturing index has been pegged at 58.8, reflecting strong growth in the sector. Notably, any reading above 50 indicates overall growth of the manufacturing sector. Steady industrial production indicates that the U.S. economy is in fine fettle.

Factors Supporting the Growth

Higher production of motor vehicles, construction supplies, business supplies and materials provided a boost to the manufacturing sector. As a result of the surge in manufacturing output, U.S. industrial production rose 0.3% in December, outpacing the consensus estimate of 0.2%.

Further, the Department of Labor stated that the manufacturing sector generated 284,000 jobs in 2018, the highest number since 1997.

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 one-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 Automotive Port (FSAVX Free Report) seeks capital appreciation. This fund invests the majority of its assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires and related services.

This Sector – Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 0.3% over the three-year and 0.8% 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.

FSAVX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.96%, which is below the category average of 1.34%.

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. Specifically, the fund has returned 13.8% over the three-year and 9.5% 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 has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.19%.

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 5.5% over the three-year and 4% 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 1.19%.

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