Per the U.S. Census Bureau’s reporton Aug 3, new orders for manufactured goods rose 1.5% in June, increasing by $7.4 billion to $506.0 billion. The figure for May was also revised upward to 2.3% from the previously-reported 1.7% rebound. Stronger demand for airplanes, oil and other industrial goods pushed factory orders higher, surpassing the consensus estimate of a 1% rise.

New orders have risen in 13 of the last 14 months, and the growth streak points toward surge in demand, well above the pre-pandemic levels. The sub-indexes, shipments increased 1.6% or $7.6 billion, after rising 0.9% in May, while unfilled orders also rose for the fifth consecutive month, increasing 1%. Inventories are up 1% for June.

Durable orders increased 0.9% or $2.3 billion in June, and the biggest increase was recorded in new bookings of commercial planes. Airplane makers have reported new orders again as more people begin to travel. Transportation equipment registered a 2% increase in orders, while inventories grew 0.9%. Petroleum and coal product led the shipments with an increase of 8.1%.

Orders for capital goods that exclude aircraft and military items rose a revised 0.7% in June and orders for nondurable goods like food, clothing and drugs advanced 2.1%.

The reopening efforts have helped in the fast recovery of the U.S. economy and generated business for manufacturers. Dearth in labor and supplies is expected to become a hurdle for manufactures and lead to rise in price and temporary curtail in production.  However, this is temporary and manufactures expect to recruit fresh labor and mitigate the supply-chain issues.

The Institute for Supply Management (ISM) reported on Aug 2 that its manufacturing index remained in the expansion territory at 59.5 in July. Meanwhile, the Employment Index in the manufacturing sector improved to 52.9 in July. Hence, the shortage in supply of labor and raw materials is easing.

4 Fund Choices

Given the continued growth in factory orders, 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 and 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 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 6.9% and 14.3% over the past three and five-year benchmarks, respectively. It has an annual expense ratio of 0.77%.

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 6.4% and 11.1% over the past three and five years, respectively. It has an annual expense ratio of 0.79%.

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 28.6% and 23.9% over the past three and five years, respectively. It has an annual expense ratio of 0.88%.

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 10.2% and 11.5% over the past three and five years, respectively. It has an annual expense ratio of 0.76%.

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