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US Service Sector Thrives on Solid Job Addition: 4 Funds to Buy
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The U.S. economy has been making steady recovery from the coronavirus pandemic slump as businesses reopen and restart hiring. Per the Labor Department’s report on Aug 6, the country recorded the fastest job additions in almost a year in July. Nonfarm payrolls increased 943,000 last month versus the consensus estimate of 854,000 and surpassing the upwardly revised 938,000 new jobs in June. This now brings the unemployment rate down to 5.4% from 5.9% in June and also beats the consensus estimate of 5.7%.
Businesses, especially those in the leisure and hospitality sector, have continued the strong hiring streak, adding 380,000 new jobs. Food services and drinking places added 253,000 new jobs alone, nearly two-third of the total jobs in this sector. While Accommodation/Hotels added 74,000, hiring in arts, entertainment, and recreation rose by 53,000. But even after such dramatic growth, employment in leisure and hospitality fell 10.3% from last February.
Additionally, local government education and private education added 221,000 and 40,000 new employees, respectively. Transportation and warehousing added 50,000 jobs in July, and Health care added 37,000 new jobs. Solid job additions in the past month also played a significant role in boosting the U.S. service sector. Per the Institute for Supply Management’s (ISM) report on Aug 4, the ISM Services Index increased to 64.1 in July, beating the consensus estimate of 60.5%, growing for the 14th month in a row now. All the 17 services industries reported growth and the Employment Index has also shown improvement despite the constrained labor pool that remains an issue along with materials shortages, inflation and logistics disruption.
Needless to say, the service sector has picked up on the back of rapid vaccination, government aid and easing of restriction. And despite the new cases of coronavirus, especially the delta variant, Americans’ spirits are still high. In fact, one of the ISM survey respondents from the accommodation & food services states that “peak demand while still facing challenges filling open positions.” Hence, there is high scope and space for the service sector to grow in the upcoming months.
4 Funds to Buy
We have, thus, selected four service-related mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from the aforementioned 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 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 Retailing Portfolio (FSRPX - Free Report) fund aims for capital appreciation. This non-diversified fund invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.
This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned 23.7% over the past three and five years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.
Fidelity Select Leisure Portfolio (FDLSX - Free Report) fund invests a bulk of its assets in securities of companies engaged in the design, production or distribution of goods or services in the leisure and recreation industries. The fund seeks growth of capital and invests both in U.S. and non-U.S. companies.
This Sector – Other product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 16.6% and 16.7 over the past three and five years, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 0.79%.
Fidelity Select Banking Portfolio (FSRBX - Free Report) fund seeks appreciation of capital. FSRBX normally invests at least 80% of assets in common stocks of companies principally involved in banking. The fund invests in both U.S. and non-U.S. companies.
This Sector-Finance product has a history of positive total returns for over 10 years. Specifically, the fund has returned nearly 8% and 14.2% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSRBX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.79%, which is below the category average of 1.08%.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) fund invests a large chunk of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
This Sector – Health product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 17.7% and nearly 17% over the past three and five years, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSHCX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%, which is below the category average of 1.03%.
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US Service Sector Thrives on Solid Job Addition: 4 Funds to Buy
The U.S. economy has been making steady recovery from the coronavirus pandemic slump as businesses reopen and restart hiring. Per the Labor Department’s report on Aug 6, the country recorded the fastest job additions in almost a year in July. Nonfarm payrolls increased 943,000 last month versus the consensus estimate of 854,000 and surpassing the upwardly revised 938,000 new jobs in June. This now brings the unemployment rate down to 5.4% from 5.9% in June and also beats the consensus estimate of 5.7%.
Businesses, especially those in the leisure and hospitality sector, have continued the strong hiring streak, adding 380,000 new jobs. Food services and drinking places added 253,000 new jobs alone, nearly two-third of the total jobs in this sector. While Accommodation/Hotels added 74,000, hiring in arts, entertainment, and recreation rose by 53,000. But even after such dramatic growth, employment in leisure and hospitality fell 10.3% from last February.
Additionally, local government education and private education added 221,000 and 40,000 new employees, respectively. Transportation and warehousing added 50,000 jobs in July, and Health care added 37,000 new jobs. Solid job additions in the past month also played a significant role in boosting the U.S. service sector. Per the Institute for Supply Management’s (ISM) report on Aug 4, the ISM Services Index increased to 64.1 in July, beating the consensus estimate of 60.5%, growing for the 14th month in a row now. All the 17 services industries reported growth and the Employment Index has also shown improvement despite the constrained labor pool that remains an issue along with materials shortages, inflation and logistics disruption.
Needless to say, the service sector has picked up on the back of rapid vaccination, government aid and easing of restriction. And despite the new cases of coronavirus, especially the delta variant, Americans’ spirits are still high. In fact, one of the ISM survey respondents from the accommodation & food services states that “peak demand while still facing challenges filling open positions.” Hence, there is high scope and space for the service sector to grow in the upcoming months.
4 Funds to Buy
We have, thus, selected four service-related mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from the aforementioned 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 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 Retailing Portfolio (FSRPX - Free Report) fund aims for capital appreciation. This non-diversified fund invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.
This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned 23.7% over the past three and five years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.
Fidelity Select Leisure Portfolio (FDLSX - Free Report) fund invests a bulk of its assets in securities of companies engaged in the design, production or distribution of goods or services in the leisure and recreation industries. The fund seeks growth of capital and invests both in U.S. and non-U.S. companies.
This Sector – Other product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 16.6% and 16.7 over the past three and five years, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 0.79%.
Fidelity Select Banking Portfolio (FSRBX - Free Report) fund seeks appreciation of capital. FSRBX normally invests at least 80% of assets in common stocks of companies principally involved in banking. The fund invests in both U.S. and non-U.S. companies.
This Sector-Finance product has a history of positive total returns for over 10 years. Specifically, the fund has returned nearly 8% and 14.2% over the past three and five years, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.
FSRBX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.79%, which is below the category average of 1.08%.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) fund invests a large chunk of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
This Sector – Health product has a track of positive total returns for more than 10 years. Specifically, the fund has returned 17.7% and nearly 17% over the past three and five years, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSHCX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.73%, which is below the category average of 1.03%.
Want key mutual fund info delivered straight to your inbox?
Zacks' free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>