3 Funds to Buy on Rebounding Semiconductor Sales

The semiconductor industry is making massive efforts to rebound from the 2023 lows. The future holds promise as demand is rebounding, triggered by the optimism surrounding artificial intelligence (AI).

The Semiconductor Industry Association (SIA) said last week that global semiconductor sales totaled $46.2 billion in February, increasing a solid 16.3% year over year. February 2023’s sales were recorded at $39.7 billion.

However, month-over-month sales declined marginally in February by 3.1% from January’s total of $47.6 billion.

John Neuffer, SIA president and CEO, said, “Although month-to-month sales were down slightly, global semiconductor sales in February remained well ahead of the total from the same month last year, a continuation of the strong year-to-year growth the market has experienced since the middle of last year.”

It wasn’t a great 2023 for the semiconductor industry despite high demand. Rising costs, disruptions in supply chains, and increased interest rates as part of the Federal Reserve's efforts to address inflation posed challenges for the industry.

However, as inflation pressures eased, demand picked up once again, and the second half of 2023 showed signs of recovery.

Demand for semiconductors is further being driven by the optimism surrounding AI, particularly generative AI.

Many technology companies are exploring this opportunity to capitalize on business prospects, making semiconductors increasingly vital. According to Gartner's forecast, global semiconductor revenues are anticipated to rise by 16.8% this year, reaching a total of $624 billion.

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to semiconductor producers 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 five-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 Technology Portfolio FSPTX seeks capital appreciation by investing most of its assets in common stocks of companies principally engaged in offering, using, or developing products, processes, or services that will provide or benefit significantly from technological advances and improvements. Most of the fund's holdings were in companies like Microsoft Corp (17.3%), Apple (17%) and Nvidia Corp (13.4%) as of Aug 31, 2023.

Specifically, Fidelity Select Technology Portfolio fund’s returns over the three and five-year benchmarks are 10.2% and 24.1%, respectively. The annual expense ratio of 0.68% is lower than the category average of 1.23%. FSPTX carries a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Red Oak Technology Select ROGSX fund seeks long-term capital growth by investing primarily in stocks of companies that rely extensively on technology in their product development or operations, or which may be experiencing growth in sales and earnings driven by technology-related products and services. ROGSX primarily invests in technology companies that develop, produce, or distribute products or services related to computers, semiconductors and electronics.

Specifically, Red Oak Technology Select fund’s returns over the three and five-year benchmarks are 11.3% and 15.5%, respectively. The annual expense ratio of 0.94% is lower than the category average of 1.23%. ROGSX carries a Zacks Mutual Fund Rank #2.

To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Janus Henderson Global Technology and Innovation Fund JNGTX aims for long-term growth of capital and specializes in technology. JNGTX invests at least the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.

Janus Henderson Global Technology and Innovation Fund has a track of positive total returns for over 10 years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 8.1% and 19.3%, respectively. The fund has an annual expense ratio of 0.80%. Janus Henderson Global Technology and Innovation Fund has a Zacks Mutual Fund Rank #2.

To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.

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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.

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