After a revised 0.1% decline in April, U.S. factory orders rose 1.7% in May, per the Commerce Department’s report on Jul 2. Despite the bottlenecks in the supply chain, new orders for manufactured goods increased by $8.1 billion to $495.5 billion, as spending on equipment remained elevated.

Factory orders for the month were slightly higher than the consensus estimate of a 1.6% rise. Per the reports, new orders were lifted by a 7.7% surge in orders for transportation equipment after two consecutive monthly decreases. Meanwhile, new orders for manufactured nondurable goods increased 1%.

Sub-indexes like shipments edged up 0.7% and inventories rose 0.9%. Shipment of machineries led the increase with a 1.4% jump, while manufactured nondurable good recorded a 1% rise. Additionally, petroleum and coal products shipments rose 2.5%. The economy is on track for sped-up recovery and the massive stimulus has pent-up demand for durable manufactured goods and big-budget items.

However, the manufacturing space is constantly facing hurdles like supply chain crisis and disruptions in the global shipping industry. Per the report, unfilled orders at factories rose 0.8%, after gaining 0.4% in the month before.

Decline in coronavirus cases and rapid vaccination have also helped in reopening of factory floors and re-hiring of workers across industries. These factors will continue to boost new orders in the second half of the year.

Additionally, the Institute for Supply Management reported that its Manufacturing PMI for June came in at 60.6, indicating expansion in the overall economy for the 13th month in a row after contraction in April 2020 when the coronavirus outbreak crippled the system.

4 Top Fund Picks

Given the rebound in factory orders in May, 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 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. 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 has returned 25.6% and 20.7% over the past three and five years, respectively.

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. 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 has returned 7.8% and 11.9% over the past three and five years, respectively.

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. 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 has returned 6.2% and 14.6% over the past three and five-year benchmarks, respectively.

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. 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 returned 10.3% and 12% over the past three and five years, respectively.

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