On May 4, the U.S. Census Bureau reported that new orders for manufactured goods increased $5.8 billion or 1.1% to $512.9 billion in March. Manufactures increased production to match inflated demand for cars, construction equipment, computers, furniture and other durable goods.

March’s jump in factory order outpaced the revised 0.5% decline in factory order in the prior month but was slightly lower than the consensus estimate of 1.3%. The report highlights that companies are being flooded with new orders as the economy recovers from the pandemic. The economy has a sped-up recovery, thanks to massive federal stimulus, decline in coronavirus cases and rapid vaccination. These factors will continue to boost new orders.

However, constraints in the supply chain, shortage in raw materials and sharp increases in prices are holding manufacturer back. In fact, the Commerce Department had reported on Apr 26 that orders for long-lasting durable goods increased 0.5% in March after declining significantly in February. There has been a substantial rise in orders for primary metals, fabricated metal parts and machinery. Shipments have also jumped 2.1% or $10.8 billion to $513.6 billion in March.

In the automobile sector, global shortage of computer chips has emerged as a major problem. In the reported month, orders for new cars and trucks increased 5.5% after plunging more than 9% in February. Though manufacturers have managed to keep their assembly lines going, chip shortage is still constraining production of some models.

4 Mutual Fund Picks

Given the jump in factory orders in March, we have shortlisted four 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 Quick QuoteFSAVX - Free Report) fund aims for capital appreciation. This fund invests majority of 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, FSAVX has returned 25.9% and 19.3% 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.

FSAVX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.88%.

Fidelity Select Chemicals Portfolio (FSCHX Quick QuoteFSCHX - Free Report) fund aims for capital appreciation. The non-diversified fund normally invests majority of 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, FSCHX has returned 5.4% and 10.9% 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.

FSCHX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%.

Fidelity Select Defense & Aerospace Portfolio (FSDAX Quick QuoteFSDAX - Free Report) fund invests a huge portion of its assets in the securities of companies, involved primarily in the research, manufacture, and the sale of products and services, per the defense or aerospace industries. It seeks capital growth by investing in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for more than 10 years. Specifically, the fund has returned 5.1% and nearly 15% over the past three and five-year benchmarks, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSDAX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.75%.

Fidelity Select Industrials Portfolio (FCYIX Quick QuoteFCYIX - 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, FCYIX has returned 8.7% and 11.2% 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.

FCYIX has a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.76%.

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