Invest in Consumers with These Top Ranked Mutual
Analysts and market watchers widely believe that the Federal Open
Market Committee, which is expected to meet next week, will rule in
favour of tapering its bond purchase program. The committee is
widely expected to bring down Treasury purchases from $45 billion a
month to $35 billion a month. This is also an indication that the
Fed believes that economic conditions in the U.S. are improving and
the time is ripe for such a move.
Positive Economic Data
Several key reports have pointed towards an improving economic
situation. Last week, initial claims numbers declined by 9,000 to a
seasonally adjusted level of 323,000. This is very close to its
lowest point in five years. The four week moving average declined
to 328,500, the lowest level experienced since October 2007.
Additionally, the unemployment rate has declined to 7.3%, the
lowest level in nearly five years. More importantly, the
Institute for Supply Management said that its non-manufacturing
index rose from 56 to 58.6 for the month of August. This was the
highest level experienced since December 2005 and exceeded
expectations that it would touch 55.
Inflation and Interest Rates
At the same time, inflation has remained at relatively low levels.
The only increases have come in terms of gas and grocery prices.
The latest levels continue to remain at around 2%. This is still
below the Fed target of 2.5%. This also implies that this continues
to be a good environment for automobile manufacturers, travel
companies and retailers.
Meanwhile, though interest rates continue to rise, they are still
at comparatively lower levels. Quarterly data from the Federal
Reserve shows that payments on mortgage and consumer loans as a
percentage of household income have declined after the recession
came to an end in June 2009. The debt service ratio in last year's
fourth quarter was recorded at 10.3%. This is the lowest level
An Upsurge in Discretionary Spending
Increasing confidence in the economy, higher asset values and
falling levels of unemployment have all contributed towards higher
discretionary spending. An inimical economic environment has pushed
households towards purchasing items other than those which are
This is borne out by the Standard and Poor's 500 Consumer
Discretionary Index is the best performer among the S&P 500's
10 major industry-group indices. This index tracks the performance
of retailers, auto mobile manufactures, media and hotel companies
as well as homebuilders.
Mutual Fund Picks
Fidelity Select Consumer Discretionary
Launched in June 1990, this is a large fund with net assets of $514
million. It has a minimum initial investment requirement of $2,500.
The fund focusses on companies which focus on manufacturing and
distributing consumer discretionary products and services. It
invests in both domestic and foreign companies.
The mutual fund holds 64 securities in all. Its top 10 holdings
make up 34.59% of its assets. Its top 3 holdings are
The Walt Disney Company
Twenty-First Century Fox, Inc.
(FOXA). The fund returned 33.99% over the last one year period and
has a Zacks Rank #1(Strong Buy).
This is a fund with similar minimum initial investment requirements
of $2,500 and was launched in April 1998. This fund focusses on
investing in equity securities and derivatives of transportation
companies which are traded on domestic exchanges. It concentrates
on investing in small and mid-cap companies.
This fund holds a total of 54 securities. It is fairly concentrated
around its top 10 holdings, which account for 40.95% of its assets.
Its top three assets are
United Parcel Service, Inc.
Union Pacific Corporation
Ford Motor Co
(F). The fund returned 50.61% over the last one year period and has
a Zacks Rank #1(Strong Buy).
Also launched in April 1998, this fund has a minimum initial
requirement of $2,500. The fund invests heavily in leisure
companies, focussing on equity securities and derivatives traded in
the U.S. It focusses on investing in small and mid-cap companies.
It may also gain exposure to foreign leisure companies via ADRs.
The fund has a total number of 84 assets. The asset it is most
invested in is
Philip Morris International, Inc.
(PM) which makes up 3.95% of its assets. The next two, Comcast and
Walt Disney, together make up 7.22% of its assets. The fund
returned 36.73% over the last one year period and has a Zacks Rank
The U.S. economy seems to be on a firmer footing now than before,
especially with tapering in sight. Since, they focus on consumer
discretionary stocks, these mutual funds are good choices for your
View All Zacks #1 Ranked Mutual Funds
COMCAST CORP A (CMCSA): Free Stock Analysis
DISNEY WALT (DIS): Free Stock Analysis Report
FORD MOTOR CO (F): Free Stock Analysis Report
TWENTY-FST CF-A (FOXA): Free Stock Analysis
Get Your Free (FSCPX): Fund Analysis Report
PHILIP MORRIS (PM): Free Stock Analysis Report
Get Your Free (RYLIX): Fund Analysis Report
UNION PAC CORP (UNP): Free Stock Analysis
UTD PARCEL SRVC (UPS): Free Stock Analysis
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