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Construction Boom Calls for Investing in These 3 Solid Funds

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Domestic construction spending picked up in November on the back of a surge in home building, particularly, apartment construction. Further, a steady increase in both private and residential construction gave the metric a boost. The release of this report was delayed due to the longest ever partial government shutdown.

Under such encouraging conditions, investingin mutual funds with significant exposure to construction companies seems judicious.

Construction Activity Nudges Up in November

U.S. Census Bureau reported that U.S. construction spending for November increased 0.8%, beating the consensus estimate of 0.2%. Moreover, the figure increased 3.4% from the same period last year. In fact, through the first 11 months of the year, spending was 4.5% higher than in the same period of 2017.

Spending on homebuilding surged 3.5% in the month, which also led to a 2.6% increase in apartment construction. Such a surge offset the decline of 1.8% in single-family construction.

Factors Supporting Growth

In November, private construction spending increased 1.3% to $993.4 billion. Meanwhile, residential construction also increased 3.5% from October to $542.5 billion in the month.

From the non-residential domains, spending on highway construction increased 1.7% from October to $450.8 billion. Meanwhile, sales of newly constructed single-family homes, accounting for roughly 10% of all U.S. home sales, soared 16.9% in November from the prior month to a seasonally adjusted annual rate of 657,000 units, per data released on Jan 31, by the Commerce Department.

3 Best Choices

We have, thus, selected three real estate mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong 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 Advisor Real Estate Income A (FRINX - Free Report) invests heavily in debt and mortgage-backed securities of real estate companies and preferred and common stocks of REITs. FRINX invests a bulk of its assets in securities of real estate companies and other real estate related investments. 

This Sector – Real Estate product has a track of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 5.3% and 5.9%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FRINXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.02%, which is below the category average of 1.23%.

DFA Real Estate Securities Portfolio Institutional Class (DFREX - Free Report) invests in marketable equity securities of companies engaged in ownership, management, development, construction and sale of residential, commercial as well as industrial real estate. DFREX usually invests in equity securities of companies in certain real estate investment trusts as well as companies involved in residential construction.

This Sector – Real Estate product has a track of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 3.6% and 8.5%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

DFREX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.18%, which is below the category average of 1.23%.

John Hancock II Real Estate Securities 1 (JIREX - Free Report) seeks appreciation of capital and income over the long term. JIREX invests primarily in equity securities of companies engaged in operations related to the real estate sector, which includes REITs. The fund invests in securities including common stock, preferred stock and convertible securities. It may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory.

This Sector – Real Estate product has a history of positive total returns for over 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 7.8% and 9.6%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

JIREX has an annual expense ratio of 0.80%, which is below the category average of 1.23%.

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