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U.S. Job Additions Exceed Expectations: 4 Fund Picks


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Following a great show in May, jobs data remained upbeat in June. Job creations last month was significantly higher than the expected figure. Steady gains in employment pushed workers' pay higher, with average hourly wages increasing. The unemployment rate, did, increase from May's 18-year low, but the reason was mainly due to a surge in labor force participation rate.

Rise in workforce participation rate and slower growth in average hourly wages indicated expansion in labor market. Moreover, a better-than-expected jobs report indicated a rosier economy and secured chances of more rate hikes in the coming months.

Sectors like construction, manufacturing, healthcare and mining, and private service providers witnessed strong job gains. In this context, investing in mutual funds with significant exposure to these sectors is considered a strong investment choice.

June's Job Additions Beat Estimate

Domestic non-farm payrolls advanced by 213,000 in June, significantly higher than the consensus estimate of 196,000, per the United States Bureau of Labor Statistics (BLS). Moreover, the BLS reported that April's job numbers was revised up by 16,000 to 175,000, while May's figure was upwardly revised by 21,000 to 244,000.

Meanwhile, average hourly earnings rose by 0.2% or 5 cents to $26.98 in June, lower than the consensus estimate and May's figure of an increase of 0.3%. Further, the unemployment rate rose by 0.2% to 4% in June.

However, the unemployment rate increased slightly only because the labor force participation rate in June was 62.9%, reflecting a 0.2% increase from the prior month. Improvement in employment and gradual wage growth, with older workers retiring and leaving the labor force, has boosted the job participation rate.

Industries That Experienced Job Gains

The manufacturing industry added around 36,000 jobs last month, posting its best job growth since last December. The sector advanced by 285,000 in the past 12 months. Strong jobs gains in the manufacturing industry were supported by motor vehicles and parts industry, which created 12,000 new jobs, its highest since last August.

Also, the overall private service-providing industry created 149,000 new jobs supported by respective job additions of 50,000 and 54,000 in the professional and business services, and education and health services industries.

The construction industry created around 13,000 jobs in June and increased by 282,000 in the last one year. Also, the mining industry has added 5,000 jobs in June and increased by 95,000 in the past 12 months.

Buy These 4 Sectoral Mutual Funds

Here we have selected four mutual funds that have significant exposure to sectors that saw strong job additions in June. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Further, these funds have encouraging one-year annualized returns and minimum initial investment within $5000. Also, these funds have low expense ratios.

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.

Fidelity Select Automotive Portfolio  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.

FSAVX carries an expense ratio  of 0.96% compared with the category average of 1.39%. Moreover, FSAVX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 15.9%.

The fund has a Zacks Mutual Fund Rank #2. Elliot Mattingly is the fund manager of FSAVX since 2017. As of the last filing, General Motors Co is the top holding for FSAVX.

Hartford Healthcare HLS Fund IA  HIAHX invests a bulk of its assets in equity securities of companies engaged in the healthcare industry. These companies are located in different countries including the United States. HIAHX may invest in securities issued by companies of any market capitalization.

HIAHX carries an expense ratio of 0.90% compared with the category average of 1.35%. Moreover, HIAHX requires a minimal initial investment of $0. The fund has one-year annualized returns of 5.8%.

The fund has a Zacks Mutual Fund Rank #2. Robert L. Deresiewicz is one of the fund managers of HIAHX since 2000. As of the last filing, UnitedHealth Group Inc is the top holding for HIAHX.

Fidelity Select Transportation  FSRFX seeks capital growth. FSRFX invests a large chunk 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.

FSRFX carries an expense ratio of 0.80% compared with the category average of 1.22%. Moreover, FSRFX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 10.5%.

The fund has a Zacks Mutual Fund Rank #2. Matthew Moulis is the fund manager of FSRFX since 2012. As of the last filing, Union Pacific Corp. is the top holding for FSRFX.

Fidelity Select Software & IT Services Portfolio  FSCSX invests the majority of its assets in companies whose primary operations are related to software or information-based services. FSCSX primarily focuses on acquiring common stocks of both domestic and foreign companies. The fund uses fundamental analysis to select companies for investment purposes.

FSCSX carries an expense ratio of 0.73% compared with the category average of 1.44%. Moreover, FSCSX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 32.6%.

The fund sports a Zacks Mutual Fund Rank #1. Ali Khan is the fund manager of FSCSX since 2014. Further, as of the last filing, Microsoft Corp. is the top holding for FSCSX.

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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: FSCSX , HIAHX , FSAVX , FSRFX



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