We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Manufacturing Activity Remains Resilient: 3 Funds to Buy
Read MoreHide Full Article
Per the latest report from the Institute of Supply Management, manufacturing activity in the United States dipped slightly in March compared with February. However, this apparent decline is rather a correction and momentary. Further, it is also indicative of a burgeoning economy even as the global markets remain resilient.
Such claims can also be supported by the fact that manufacturers are on a hiring spree. Such jobs not only offer relatively higher wages but also create multiplier effects within the economy, unlike other service sector jobs. Hence, a booming manufacturing sector is likely to boost the economy as a whole. Finally, a weakening dollar has made the U.S. manufacturing sector competitive by boosting global demand for indigenously produced goods.
Correction Not a Decline
The ISM manufacturing index for the month of March came in at 59.3% compared with 60.8% in February — when the index hit a 14-year high. However, it would be wise to call such a dip as correction rather than a decline.
What should be noted is that any reading above 50 is indicative of an economic expansion. In fact, 17 out of the total 18 manufacturing industries that were surveyed, reported growth in March. This clearly indicates that the U.S. heavy industrial sector is advancing steadily.
Further, the report stated that the reading for new orders, production and employment all declined in the period. It is however, important to note that all these metrics are hovering near all-time highs hit recently.
Also, spending on capital goods ticked up in February supported by solid business confidence, strength in global economic growth and weakness in greenback. Moreover, the Backlog of Orders Index expanded for the 14th straight month to log its highest reading since May 2004.
The recent weakness in manufacturing activity has risen due to seasonal fluctuations such as labor and skill paucity which has weighed on production in the economy. Further, inputs have been affected mainly by factors like harsh weather conditions, Asian holidays, transportation difficulties and disruptions in the steel and aluminum industries primarily due to trade war fears. It is therefore safe to say that manufacturing will spring back to normal action in the next few days.
Manufacturing Jobs Remain High
The ISM Employment index came in at 57.3% in March, to register growth in employment for the 18th straight month. Several companies increased head count in sync with growing production. U.S. employers added 313,000 new jobs in February, after an upwardly revised 239,000 in January and above our expectations of 208,000 jobs. The February figure marks the highest rise in payrolls since July 2016. Solid job gains in construction, retail trade, professional and business services, manufacturing, financial activities, and mining sectors drove the numbers.
Rate of unemployment was 4.1%, unchanged from the prior month's 17-year low. The average workweek recovered to 34.5 hours after falling to 34.4 hours in January. Average hourly earnings rose 0.1% to $26.75 in February, marking a slowdown from the 0.3% rise in January. This weighed on the year-over-year increase in average hourly earnings.
This highlighted that a robust domestic labor market is operating at its near-full employment level at present. Additionally, lower U.S. corporate tax rates and Trump's impetus to foster overall growth of the manufacturing sector would likely benefit the U.S. manufacturing behemoths moving ahead.
3 Best Funds to Buy
Given such circumstances, we have highlighted three mutual funds that are poised to gain significantly from a resilient manufacturing sector. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and one-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 Industrials Fund (FCYIX - Free Report) seeks capital appreciation. FCYIX normally invests at least 80% of 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.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.9% over the three-year and 13.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.29%.
Putnam Global Industrial A (PGIAX - Free Report) seeks long-term capital appreciation. The fund normally invests at least 80% of its assets in common stocks of both large and mid-sized companies principally operating in the industrial products, services or equipment space.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 13.5% over the three-year and 16% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PGIAX has a Zacks Rank #1 and an annual expense ratio of 1.28%, which is below the category average of 1.29%.
Fidelity Select Transportation (FSRFX - Free Report) 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.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 6.8% over the three-year and 16.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.82%, which is below the category average of 1.29%.
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 >>
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Manufacturing Activity Remains Resilient: 3 Funds to Buy
Per the latest report from the Institute of Supply Management, manufacturing activity in the United States dipped slightly in March compared with February. However, this apparent decline is rather a correction and momentary. Further, it is also indicative of a burgeoning economy even as the global markets remain resilient.
Such claims can also be supported by the fact that manufacturers are on a hiring spree. Such jobs not only offer relatively higher wages but also create multiplier effects within the economy, unlike other service sector jobs. Hence, a booming manufacturing sector is likely to boost the economy as a whole. Finally, a weakening dollar has made the U.S. manufacturing sector competitive by boosting global demand for indigenously produced goods.
Correction Not a Decline
The ISM manufacturing index for the month of March came in at 59.3% compared with 60.8% in February — when the index hit a 14-year high. However, it would be wise to call such a dip as correction rather than a decline.
What should be noted is that any reading above 50 is indicative of an economic expansion. In fact, 17 out of the total 18 manufacturing industries that were surveyed, reported growth in March. This clearly indicates that the U.S. heavy industrial sector is advancing steadily.
Further, the report stated that the reading for new orders, production and employment all declined in the period. It is however, important to note that all these metrics are hovering near all-time highs hit recently.
Also, spending on capital goods ticked up in February supported by solid business confidence, strength in global economic growth and weakness in greenback. Moreover, the Backlog of Orders Index expanded for the 14th straight month to log its highest reading since May 2004.
The recent weakness in manufacturing activity has risen due to seasonal fluctuations such as labor and skill paucity which has weighed on production in the economy. Further, inputs have been affected mainly by factors like harsh weather conditions, Asian holidays, transportation difficulties and disruptions in the steel and aluminum industries primarily due to trade war fears. It is therefore safe to say that manufacturing will spring back to normal action in the next few days.
Manufacturing Jobs Remain High
The ISM Employment index came in at 57.3% in March, to register growth in employment for the 18th straight month. Several companies increased head count in sync with growing production. U.S. employers added 313,000 new jobs in February, after an upwardly revised 239,000 in January and above our expectations of 208,000 jobs. The February figure marks the highest rise in payrolls since July 2016. Solid job gains in construction, retail trade, professional and business services, manufacturing, financial activities, and mining sectors drove the numbers.
Rate of unemployment was 4.1%, unchanged from the prior month's 17-year low. The average workweek recovered to 34.5 hours after falling to 34.4 hours in January. Average hourly earnings rose 0.1% to $26.75 in February, marking a slowdown from the 0.3% rise in January. This weighed on the year-over-year increase in average hourly earnings.
This highlighted that a robust domestic labor market is operating at its near-full employment level at present. Additionally, lower U.S. corporate tax rates and Trump's impetus to foster overall growth of the manufacturing sector would likely benefit the U.S. manufacturing behemoths moving ahead.
3 Best Funds to Buy
Given such circumstances, we have highlighted three mutual funds that are poised to gain significantly from a resilient manufacturing sector. These funds also carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and one-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 Industrials Fund (FCYIX - Free Report) seeks capital appreciation. FCYIX normally invests at least 80% of 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.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.9% over the three-year and 13.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.29%.
Putnam Global Industrial A (PGIAX - Free Report) seeks long-term capital appreciation. The fund normally invests at least 80% of its assets in common stocks of both large and mid-sized companies principally operating in the industrial products, services or equipment space.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 13.5% over the three-year and 16% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PGIAX has a Zacks Rank #1 and an annual expense ratio of 1.28%, which is below the category average of 1.29%.
Fidelity Select Transportation (FSRFX - Free Report) 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.
This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 6.8% over the three-year and 16.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.82%, which is below the category average of 1.29%.
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 >>