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Industrial Production Sees Solid Ramp-up in May: 3 Fund Picks

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On Jun 15, the Federal Reserve reported that industrial production rose 0.8% in May, boosted by solid gain in motor vehicle assemblies. The reported figure surpassed the consensus estimate of a 0.6% rise. This third straight monthly gain in industrial production shows improvement in the space, outpacing the shortage in supply and labor, and rise in prices.

The report also highlighted that April’s industrial production was downwardly revised to a 0.1% rise from the 0.7% rise reported last month. But May’s gain came in as consumer goods, business equipment, business supplies and materials moved up. The subindex, index for durables, jumped nearly 3%, mostly due to a 5.7% rise in the output of automotive products. In May, motor vehicles and parts production rose 0.5% and this indicates that the semiconductor shortage that has been disrupting output in previous months is not that severe anymore.

Further, mining output rose 1.2% and utility output advanced 0.2%. The reports also state that more than a 2% gain was recorded across the apparel and leather, printing and support, and chemicals sectors. Along with that, the rise in chemicals output was due to reopening of some additional petrochemical plants which had to be shut down due to harsh weather conditions in February and its after effects.

Additionally, capacity utilization rose to 75.2% in May, slightly higher than the consensus estimate of 75.1%. However, April’s figure was downwardly revised to 74.6%. The Fed also reported that capacity utilization came in at the highest level since the pandemic impacted the economy last year.

3 Top Mutual Fund Choices

Given such positive economic data, investing in mutual funds that have significant exposure to the manufacturing and industrial space seems prudent. We have thus highlighted three mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (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 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 Chemicals Portfolio (FSCHX - Free Report) fund seeks capital appreciation. The fund normally invests at least 80% 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 7.8% and 11.9% over the three and five-year period, 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 0.79%, which is below the category average of 1.10%.

Fidelity Select Utilities Portfolio (FSUTX - Free Report) aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies primarily engaged in the utilities industry and companies generating most of their revenues from utility operations.

This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 9.6% and 10.3% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSUTX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 0.98%. 

Fidelity Select Materials Portfolio (FSDPX - Free Report) aims for capital appreciation. This non-diversified fund invests majority of assets in common stocks of companies principally engaged in the manufacture, mining, processing, or distribution of raw materials and intermediate goods.

This Sector – Energy product has a history of positive total returns for over 10 years. Specifically, FSDPX has three and five-year return of 10.1% and 11.7%, respectively. To see how this fund performed compared to its category and other #1 and 2 Ranked Mutual Funds, please click here.

FSDPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%, which is below the category average of 1.10%.

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