The Institute of Supply Management announced this morning that
its manufacturing index rose to 59% for the month of August, from
57.1% in July. This is the highest reading since March 2011,
when the index was at 59.1%. According to the ISM, "of the 18
manufacturing industries, 17 are reporting growth in August."
Further, the New Orders Index posted increased to 66.7%, which is a
3.3% increase from July, displaying growth in new orders for the 15
consecutive month. The new orders index, is the highest since
April 2004, when it reached 67.1%.
Finally, the Production Index also rose month over month, with the
index reaching 64.5% in August, up 3.3% from July.
When you combine all three of these important factors, they
indicate a growing economy with consumers purchasing more durable
goods (for example hardware or automobiles), then in previous
What does this mean for Investors?
With manufacturing, orders, and production all showing positive
upward trends it would be wise to look into some manufacturing
heavy mutual funds for your portfolio. We have identified 3
such mutual funds that are heavy Industry Cyclical sector, and are
positioned to ride the positive manufacturing wave. These
funds are relatively inexpensive to enter, and have no loaded fees
associated with the funds.
We utilized the Zacks Mutual Fund Rank system to identify the top
three funds to exploit the recent positive ISM news. To learn
more about the Zacks Mutual Fund Ranking System,
please click here
Funds To Consider
Fidelity Select Transportation Portfolio
) a Zacks Rank #1 (Strong Buy) seeks stocks of companies
principally engaged in providing transportation services, or
companies engaged in the design, manufacture, distribution, or sale
of transportation equipment. The fund offers dividends and
capital gains twice a year in April and December.
This fund has over 92% of their positions in the Industry Cyclical
sector, and therefore is well positioned to take advantage of the
strong ISM numbers. It is heavy Union Pacific, Delta
Airlines, and CSX.
Further, this fund started in 1986, has a minimum investment of
Past Performance: 1 year 29.84%, 3 year 21.57%, 5 year 24.47%.
Fidelity Select Air Transportation Portfolio
) a Zacks Rank #1 (Strong Buy) seeks companies that principally
engage in the regional, national, and international, movement of
passengers, mail, and freight via aircraft. The fund offers
dividends and capital gains twice a year in April and
This fund has over 80% of their fund in the Industry Cyclical
sector. While they are heavy airline stocks, they are also
heavy in Boeing, UPS, Precision Castparts, and C.H. Robinson
This fund was initiated in 1985, and has a minimum initial
investment of $2,500.
Past Performance: 1 year 27.72%, 3 year 24.65%, 5 year
Fidelity Select Chemicals Portfolio
) a Zacks Rank #1 (Strong Buy) seeks capital appreciation through
companies engaged in the research, development, manufacture, or
marketing of products or services related to the chemical process
industries. The fund offers dividends, and capital gains
twice a year in April, and December.
This fund has over 75% of their fund in the Industry Cyclical
sector. The fund is heavy Du Pont, Monsanto, Dow Chemical, CF
The fund was initiated in 1985, and has a minimum initial
investment of $2,500.
Past Performance: 1 year 20.63%, 3 year 17.01%, 5 year 21.61%.
The ISM numbers have shown a sustained upward trend in the
manufacturing sector over the past several months. Therefore,
in order to capitalize on this solid trend, an investor should look
into funds that are heavy in manufacturing (see Industry cyclical)
sector. Finally, as the economy continues to grow, this
sector should only get stronger.
Want the latest recommendations from Zacks Investment Research?
Today, you can download 7 Best Stocks for the Next 30 Days.
Click to get this free report
Get Your Free (FSRFX): Fund Analysis Report
Get Your Free (FSAIX): Fund Analysis Report
Get Your Free (FSCHX): Fund Analysis Report
To read this article on Zacks.com click here.