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4 Funds to Buy on Knockout Manufacturing Data


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Per the latest report from the Institute of Supply Management (ISM), manufacturing activity in the United States expanded for the 110th consecutive month. Such gains were achieved despite uncertainties regarding the international trade policy of the White House.

The latest manufacturing data also points to sturdy economic growth in the near term. Investors looking to make the most of this positive scenario should consider investing in mutual funds having significant exposure to companies from manufacturing and related sectors.

U.S. Manufacturing Scales Best Gains in 4 Months

In June, ISM manufacturing gauge logged its best gain in four months. Per the latest report, the manufacturing index in June surged to 60.2% from 58.7% in May, surpassing the market estimate of a dip to 58.5%.

Of the 18 industries that were surveyed, 17 reported expansion last month, with supplier deliveries, production and inventories indexes climbing to 68.2%, 62.3% and 50.8%, respectively. Also, new export orders picked up 0.7 points last month to settle at 56.3%. New orders and price indexes came in at 63.5% and 76.8%, respectively.

Steady Job Additions to the Sector

Despite uncertainties related to trade war, the U.S. manufacturing sector added approximately 18,000 jobs in May. The latest ISM data revealed that the Employment Index reached 56% in June, reflecting an upswing for the 21th consecutive month. So far this year, the sector has hired extensively with a recruitment rate of 259,000 compared with 222,000 last year.

Also, manufacturers have been paying better wages than the overall average. Average weekly earnings for manufacturing employees came in at $1,097.52 last month, more than $928.74 for the overall private sector.

4 Best Funds to Buy Now

Given such positives, we have highlighted four 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 Industrials Fund  FCYIX seeks capital appreciation. FCYIX normally invests a large portion of its assets in common stocks 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 9.8% over the three-year and 11.5% 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 .

FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.04%.

Fidelity Select Automotive Port  FSAVX 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 3.3% over the three-year and 8.3% 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 .

FSAVX has a Zacks Rank #2 and an annual expense ratio of 0.96%, which is below the category average of 1.17%.

Fidelity Select Defense & Aerospace Portfolio  FSDAX 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 18.2% over the three-year and five-year benchmarks each. 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 Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.04%.

Fidelity Select Transportation  FSRFX seeks capital growth. FSRFX invests the majority of its assets in securities of companies involved in 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 12.1% and 15.4% over the three-year and five-year benchmarks, 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 Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.04%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



This article appears in: Investing , Mutual Funds
Referenced Symbols: FSAVX , FCYIX , FSDAX , FSRFX


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