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US Manufacturing Space Revs Up in September: 4 Fund Picks
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The supply-side stress has been dampening the U.S. manufacturing space for long now. However, with demand still strong, the industrial sector is grabbing the attention of investors and reopening efforts are keeping it in a bright spot. On Oct 1, the Institute for Supply Management reported that economic activity in the manufacturing sector or ISM Manufacturing Purchasing Managers' Index (PMI) grew to 61.1% in September. The reading shows 1.2 percentage point growth from August’s reading of 59.9% and is higher than the consensus estimate of 59.6%.
Per the report, all six major manufacturing industries, including petroleum & coal products; computer & electronic products; chemical products; food, beverage & tobacco products; fabricated metal products; and transportation equipment, have registered moderate to strong growth last month. Also, 18 of the 17 manufacturing industries reported growth, and only the wooden products industry witnessed a slowdown in September.
Manufacturers have stated that labor and raw material shortage are hurdles impacting production. In fact, the COVID-19 restrictions in various countries are leading to components and assemblies’ shortages and are restricting activities in ports. However, “nothing completely shut down yet.” The robust demand and retailers restocking their shelves for the holiday season and stronger overseas demand will also keep the manufacturing space humming in the last quarter of 2021.
Sub-indexes like employment increased the reading at 50.2%, which is 1.2 percentage points higher than in August. There has been a decline in backlogs of orders, a 3.4 percentage points decline to 64.8%. However, the price index continues to surge, rising 1.8 percentage points to 81.2%.
In a separate report, the U.S. Census Bureau reported on Oct 4 that new orders for manufactured goods rose 1.2% or $6.2 billion in August. The reading is higher than July’s upwardly revised figure of 0.7% and the consensus estimate of a 1% increase. Factory orders have now increased for four straight months and orders are up 18% from the same period last year.
4 Top Fund Picks
Companies and suppliers indeed continue to deal with “an unprecedented number of hurdles to meet increasing demand,” but these issues are linked to the pandemic and will be mitigated soon. Hence, the manufacturing space will gain steam, and we have shortlisted four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to grow. 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 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 portfolio diversification without several commission charges 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 assets in common stocks of companies engaged in manufacturing 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 27.7% and 20.6% over the past three and five years, respectively.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) fund invests a huge portion of its assets in the securities of companies, involved primarily in the research, manufacture, and sale of products and services, per the defense or aerospace industries. It seeks capital growth by investing in 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 4% and 12.6% over the past three and five-year benchmarks, respectively.
Fidelity Select Chemicals Portfolio (FSCHX - Free Report) fund aims for capital appreciation. The non-diversified fund invests typically a 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 5.9% and 10.5% over the past three and five years, respectively.
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. 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 9.5% and 11.6% over the past three and five years, respectively.
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US Manufacturing Space Revs Up in September: 4 Fund Picks
The supply-side stress has been dampening the U.S. manufacturing space for long now. However, with demand still strong, the industrial sector is grabbing the attention of investors and reopening efforts are keeping it in a bright spot. On Oct 1, the Institute for Supply Management reported that economic activity in the manufacturing sector or ISM Manufacturing Purchasing Managers' Index (PMI) grew to 61.1% in September. The reading shows 1.2 percentage point growth from August’s reading of 59.9% and is higher than the consensus estimate of 59.6%.
Per the report, all six major manufacturing industries, including petroleum & coal products; computer & electronic products; chemical products; food, beverage & tobacco products; fabricated metal products; and transportation equipment, have registered moderate to strong growth last month. Also, 18 of the 17 manufacturing industries reported growth, and only the wooden products industry witnessed a slowdown in September.
Manufacturers have stated that labor and raw material shortage are hurdles impacting production. In fact, the COVID-19 restrictions in various countries are leading to components and assemblies’ shortages and are restricting activities in ports. However, “nothing completely shut down yet.” The robust demand and retailers restocking their shelves for the holiday season and stronger overseas demand will also keep the manufacturing space humming in the last quarter of 2021.
Sub-indexes like employment increased the reading at 50.2%, which is 1.2 percentage points higher than in August. There has been a decline in backlogs of orders, a 3.4 percentage points decline to 64.8%. However, the price index continues to surge, rising 1.8 percentage points to 81.2%.
In a separate report, the U.S. Census Bureau reported on Oct 4 that new orders for manufactured goods rose 1.2% or $6.2 billion in August. The reading is higher than July’s upwardly revised figure of 0.7% and the consensus estimate of a 1% increase. Factory orders have now increased for four straight months and orders are up 18% from the same period last year.
4 Top Fund Picks
Companies and suppliers indeed continue to deal with “an unprecedented number of hurdles to meet increasing demand,” but these issues are linked to the pandemic and will be mitigated soon. Hence, the manufacturing space will gain steam, and we have shortlisted four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to grow. 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 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 portfolio diversification without several commission charges 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 assets in common stocks of companies engaged in manufacturing 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 27.7% and 20.6% over the past three and five years, respectively.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) fund invests a huge portion of its assets in the securities of companies, involved primarily in the research, manufacture, and sale of products and services, per the defense or aerospace industries. It seeks capital growth by investing in 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 4% and 12.6% over the past three and five-year benchmarks, respectively.
Fidelity Select Chemicals Portfolio (FSCHX - Free Report) fund aims for capital appreciation. The non-diversified fund invests typically a 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 5.9% and 10.5% over the past three and five years, respectively.
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. 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 9.5% and 11.6% over the past three and five years, respectively.
Want key mutual fund info delivered straight to your inbox?
Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>