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5 Top Mutual Funds for Q1 Earnings


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Republican tax cut and a very strong economic backdrop make it conducive for another round of stellar earnings growth in Q1. Total earnings for the S&P 500 companies are estimated to improve 16% from the same period last year on 7.4% higher revenues, the highest quarterly earnings growth pace in seven years (read more: Q1 Earnings to Take Wall Street by Storm: Top 6 Picks ).

Energy is poised to report highest earnings growth among all sectors, estimated to surge 60.3% from the same period last year on 15.6% higher revenues. The materials sector has also been looking up, with Q1 earnings expected to rise 41.4% on 20.2% higher revenues. Construction is likely to report the third-highest year-over-year profit growth, with Q1 earnings poised to be up 36.1% from the same period last year on 15.9% higher revenues.

Earnings for the Industrial sector are set to grow 23.9% from the same period last year on 12.3% higher revenues. Firm business investment helped factories expand at a record pace. Manufacturers are also on a hiring spree and are paying more than other jobs.

So far though, in spite of such uncertainty, the technology sector outperformed the broader S&P 500. In fact, Q1 earnings for the tech sector are poised to be up 20.7% from the same period last year on 11.4% higher revenues.

High profits are expected from financial segments as well. Total Q1 earnings for the financial sector are projected to rise 19.1% from the same period last year on 4.5% higher revenues. Banks, insurers and asset managers are expected to report double-digit growth mostly on higher interest rates (read more: Banks Set for Blockbuster Q1 Earnings: 5 Top Picks ).

Play the Significant Uptick in Q1 Earnings With These 5 Mutual Funds

This calls for investing in five mutual funds from the aforesaid sectors, which are expected to deliver stellar earnings growth in Q1. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy).

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 ).

Vanguard Energy InvestorVGENX , a Zacks Rank #2 fund, invests majority of its assets in the common stocks of companies principally engaged in activities in the energy industry. VGENX carries an expense ratio of 0.41%, compared with the category average of 1.37%. Moreover, VGENX requires a minimal initial investment of $3,000. VGENX fund has given annualized returns of 4.9% in the past year.

Fidelity Select MaterialsFSDPX , a Zacks Rank #1 fund, invests a major portion of its assets in securities of companies principally engaged in the manufacture, mining, processing, or distribution of raw materials and intermediate goods. FSDPX carries an expense ratio of 0.81%, compared with the category average of 1.4%. Moreover, FSDPX requires a minimal initial investment of $2,500. The fund has given annualized returns of 10.2% in the last one-year period.

Fidelity Select IndustrialsFCYIX , a Zacks Rank #1 fund, invests a large portion of its assets in securities of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of industrial products, services, or equipment. FCYIX carries an expense ratio of 0.77%, compared with the category average of 1.29%. Moreover, FCYIX requires a minimal initial investment of $2,500. The fund has given annualized returns of 14.8% in a year's time.

T. Rowe Price Science & TechnologyPRSCX , a Zacks Rank #2 fund, invests the majority of its net assets in common stocks of companies expected to benefit from the development and use of science and/or technology. PRSCX carries an expense ratio of 0.8% versus the category average of 1.38%. Moreover, PRSCX requires a minimal initial investment of $2,500. PRSCX fund has given annualized returns of 29.4% in the past year.

Fidelity Select Financial Services PortfolioFIDSX , a Zacks Rank #1 fund, invests a lion's share of its assets in securities of companies principally engaged in providing financial services to consumers and industry. FIDSX carries an expense ratio of 0.76%, compared with the category average of 1.46%. Moreover, FIDSX requires a minimal initial investment of $2,500. The fund has given annualized returns of 18.3% in the past year.

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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 , Earnings , Mutual Funds
Referenced Symbols: VGENX , FSDPX , FCYIX , PRSCX , FIDSX


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