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5 Fidelity Funds to Buy on Phenomenal Manufacturing Data

Per the latest report from the Institute of Supply Management, the ISM Manufacturing Index surged to reach its highest settlement in the last two years. Such an increase was made possible by an increase in factory activity. Moreover, economists feel that the new tax code would also help manufacturing activity in 2018 as it positively impacts business spending.

Further, sectors that showed maximum gains included transportation, heavy engineering and machinery and fabricated metals among others. Under such conditions, investing in mutual funds from such sectors appears prudent. Let's look at a few such funds from the Fidelity portfolio that would ride this wave.

Manufacturing Activity in the U.S. is Burgeoning

The ISM manufacturing index rose from 58.2% in November to 59.7% in December. This was also higher than the consensus estimate of 58.2%. The manufacturing index, which contributes around 12% to the U.S. economy, continued to expand in the last month of 2017. The factory activity measure for 2017 average was 57.6%, the highest in 13 years. A reading above 50 depicts that the economy is expanding.

Among the 18 industries that were surveyed, 15 reported growth. Some of these industries include: Machinery; Primary Metals; Miscellaneous Manufacturing; Fabricated Metal Products; Chemical Products; Nonmetallic Mineral Products; Electrical Equipment, Appliances & Components; Transportation Equipment; and Petroleum & Coal Products among others.

Moreover, the production sub-index increased almost 21 points to 65.8 and the gauge of new orders surged 5.4 points to 69.4 last month. Further, there was a swell in export orders as well.

Manufacturing activity in 2018 would benefit largely from the new tax code introduced last month that slashes the corporate tax rate to 21% from 35%. This is evident from the fact that business spending surged last month just from the optimism built around tax cuts. It goes without saying that business spending might increase further, now that the new tax code has been signed into law.

Why Fidelity Mutual Funds?

Fidelity Investments is considered as one of the leaders in the financial services industry with presence in eight countries of North America, Europe, Asia and Australia, and more than 400 research professionals. The company carries out operations in the United States through 10 regional offices and over 180 Investor Centers. The company provides investment advice, discount brokerage services, retirement services, wealth management services, securities execution, and clearance and life insurance products to its clients. It serves more than 24 million individual investors.

Fidelity had total assets of $6 trillion, with around $2 trillion under management as of Jun 30, 2017. The company manages over 500 mutual funds across a wide range of categories, including both domestic as well as foreign funds, and equity and fixed income funds.

5 Best Choices

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 ).

Here, we have highlighted five mutual funds from the Fidelity portfolio that would benefit greatly from such phenomenal ISM Manufacturing Data. These mutual funds sport a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and one-year returns. Additionally, the minimum initial investment is within $5000 and net assets are above $50 million.

Fidelity Select Industrial Equip PortFSCGX seeks capital appreciation. The fund normally invests the lion's share of its assets in common stocks of companies involved in the manufacture, distribution and service of products and equipment for the industrial sector.

FSCGX has a Zacks Rank #2 and an annual expense ratio of 0.83%, which is below the category average of 1.27%. The fund has three and one-year returns of 11.7% and 19%, respectively.

Fidelity Select Industrials Fund FCYIX seeks capital appreciation. FCYIX normally invests at least 80% of 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.

FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.27%. The fund has three and one-year returns of 11.2% and 20.2%, respectively.

Fidelity Select Automotive PortFSAVX seeks capital appreciation. This fund invests the majority of assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires, and related services.

FSAVX has a Zacks Rank #1 and an annual expense ratio of 0.95%, which is below the category average of 1.35%. The fund has three and one-year returns of 6.4% and 25.2%, respectively.

Fidelity Select Chemicals PortfolioFSCHX seeks capital appreciation. The fund normally invests at least 80% of assets in common stocks of companies principally engaged in the research, development, manufacture, or marketing of products or services related to the chemical process industries.

FSCHX has a Zacks Rank #1 and an annual expense ratio of 0.79%, which is below the category average of 1.40%. The fund has three and one-year returns of 14.6% and 33.6%, respectively.

Fidelity Select TransportationFSRFX 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.

FSRFX has a Zacks Rank #1 and an annual expense ratio of 0.82%, which is below the category average of 1.27%. The fund has three and one-year returns of 8.7% and 24.7%, respectively.

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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.


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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