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U.S. Factory Orders Continues to Tread North: 3 Fund Picks

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On Sep 2, the Commerce Department reported that new orders for U.S. manufactured goods rose for the third straight month in July by 6.4%. The uptick in July not only surpassed the consensus estimate of 5.6% but also matched the upwardly revised spike in June.

The report also highlighted that factory orders for durable goods continued the upward movement, rising 11.4% in July compared to the 7.7% rise the month before. In fact, the third consecutive monthly jump was led by a spike in orders for transportation equipment that rose 35.6% from the month before. Additionally, orders for non-durable goods and shipments of manufactured goods rose 1.8% and 4.6%, respectively, in July.

The reports highlight that manufacturers boosted output in July and continue to support the economy as it climbs back from disruptions caused by the coronavirus pandemic. Factories have been hit by virus-led lockdown measures, social distancing norms and supply chain disruptions earlier in March and April. However, efforts to reopen the economy have helped manufacturers rebound.

Earlier, a report from the Institute of Supply Management (ISM) had indicated that manufacturing activity in the United States rose for the fourth consecutive month in August. IHS Markit’s survey of purchasing managers at U.S. factories showed that manufacturing activities in August expanded at the fastest pace since January 2019. ISM Manufacturing Index increased to 56% in August from July’s 54.5% rise and beat the consensus estimate of 54.5%. A level above 50% indicates that the manufacturing sector is expanding.

3 Funds to Buy

We have shortlisted three mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such positive economic data. Moreover, these funds have encouraging 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 Select Automotive Portfolio (FSAVX - Free Report) fund aims for capital appreciation. This fund invests the majority of its assets in common stocks of companies engaged in the manufacturing of automobiles, trucks, specialty vehicles, parts, tires and related services.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 6.2% over the past five years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSAVX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.00%, which is below the category average of 1.27%.

Fidelity Select Industrials Portfolio (FCYIX - Free Report) fund aims for capital appreciation. This non-diversified fund normally invests a large portion of its assets in the common stock of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of industrial materials, equipment, products, or services.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 5.9% over the past five-year period. 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 Mutual Fund Rank #2 and has an annual expense ratio of 0.76%, which is below the category average of 1.10%.

Fidelity Select Chemicals Portfolio (FSCHX - Free Report) fund aims for capital appreciation. The non-diversified fund normally invests the majority of its 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.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 4.3% over the past five years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSCHX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.78%, which is below the category average of 1.36%.

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