Durable goods orders experienced a surge, indicating a positive outlook for the economy. According to the Commerce Department's report, durable goods orders grew 0.2% in August, amounting to $0.5 billion and taking the total to $284.7 billion. A closer look at specific sectors within durable goods reveals an optimistic picture.

Excluding transportation, new orders saw an increase of 0.4%, highlighting the widespread nature of this economic recovery. Even excluding defense orders, which experienced a slight decrease of 0.7%, the overall trend remains positive.

Machinery and transportation equipment emerged as a standout performer, leading the overall increase. This sector experienced robust growth of $0.2 billion, equivalent to a 0.5% rise, reaching a total of $37.8 billion.

Shipments of manufactured durable goods experienced growth, rising by 0.5% or $1.4 billion to reach $284.6 billion in August. The primary contributor to this increase was transportation equipment, which saw a significant surge of 0.9%, equivalent to $0.8 billion, taking the total to $92.5 billion. These improved shipment numbers indicate stronger demand and suggest the potential for ongoing economic expansion.

All these statistics collectively indicate a positive trend in the manufacturing sector. A significant rise in durable goods orders signifies growing confidence among consumers and businesses, potentially resulting in increased production and job opportunities. Consequently, this could contribute to overall economic recovery and promote stability.

Nonetheless, investing in manufacturing sector mutual funds seems to be judicious as of now. Also, mutual funds, in general, diversify portfolios without several commission charges that are mainly associated with stock purchases and trim transaction costs (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

We have, thus, chosen two mutual funds with significant exposure to the manufacturing sector. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and expense ratios considerably lower than the category average. So, these funds have provided comparatively strong performance along with lower fees.

Fidelity Select Industrials Fund (FCYIX Quick QuoteFCYIX - Free Report) invests its 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.

David Wagner has been the lead manager of FCYIX since Feb 7, 2022. Most of the fund's holdings were in companies like Fortive Corp (7.9%), Saia, Inc. (7.3%), and The Boeing Co (6.2%) as of May 31, 2023.

FCYIX's 3-year and 5-year annualized returns are 11.3% and 7.1%, respectively. FCYIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%.

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

Fidelity Select Automotive Port Fund (FSAVX Quick QuoteFSAVX - Free Report) seeks capital appreciation by investing in common stocks of companies principally engaged in the manufacture, marketing, or sale of automobiles, trucks, specialty vehicles, parts, tires, and related services.

Hiroki Sugihara has been the lead manager of FSAVX since Feb 7, 2022. Most of the fund's holdings were in companies like Tesla, Inc. (12%), Toyota Motor Corp (10.9%) and O'Reilly Automotive, Inc. (8.9%) as of May 31, 2023.

FSAVX's 3-year and 5-year annualized returns are 10.4% and 14.2%, respectively. FSAVX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.88%.
 

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