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3 Solid Funds to Buy on Growing Semiconductor Sales

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Global semiconductor sales have been slowing lately but the sector is still on solid ground despite ongoing challenges like surging prices and supply-chain issues. In fact, the global semiconductor industry has been doing well since the onset of the pandemic. While several industries are still suffering after taking a beating following the COVID-19 outbreak, the semiconductor industry flourished during the peak of the pandemic.

Rising demand for semiconductors has led to a supply-chain crisis, which has left several industries crippled. Although the problem has persisted for some time, things are likely to get better soon. The United States is preparing to become more self-sufficient in semiconductors as a new bill was recently signed into law with the aim of boosting production. Thus, funds like Fidelity Select Semiconductors Portfolio (FSELX - Free Report) , Fidelity Advisor Semiconductors Fund Class I (FELIX - Free Report) and Putnam Global Technology Fund Class A (PGTAX - Free Report) are likely to benefit in the near term.

Semiconductor Sales Grow

Semiconductor demand has soared ever since the pandemic struck, resulting in higher revenues that have reached dizzying heights over the past couple of years. Earlier this month, the Semiconductor Industry Association ("SIA") released a report stating that global semiconductor sales increased 0.1% year over year to $47.4 billion in August from $47.3 billion the previous year.

Sales did, however, decline marginally by 3.4% on a sequential basis in August. The decline in monthly sales is a recent issue as the industry is facing several challenges. Lockdowns brought on by COVID in China have made the supply-chain issue even worse.

Additionally, as people start returning to their offices and businesses, the demand for PCs, which peaked during the height of the pandemic, is once again on the decline. This is having an immediate effect on sales.

However, sales have been increasing year over year, which is a good sign. The SIA said that sales increased 1.5% in Europe month over month, despite a decline in China. Europe is one of the key markets for the semiconductor industry and the jump in sales is an encouraging sign.

Moreover, the advancement in technologies like machine learning, artificial intelligence and the Internet of Things is also boosting the demand for semiconductors.

Also, a significant boost for the semiconductor industry will come from the recently passed CHIPS and Science Act of 2022. The act aims at boosting semiconductor production and making the United States more self-reliant. The $280-billion plan also includes subsidies and funding for research.

Moreover, the act has $52 billion in incentives for American semiconductor manufacturers. The output of semiconductors will consequently increase significantly. The proposal would also provide semiconductor firms with a $24-billion investment tax credit.

Our Choices

We have, thus, selected three mutual funds with significant exposure to semiconductor producers 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 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 Semiconductors Portfolio fund seeks capital appreciation. FSELX normally invests at least 80% of assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards, and other components); equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Fidelity Select Semiconductors Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSELX’s returns over the three and five-year benchmarks are 25.5% and 21.5%, respectively. Fidelity Select Semiconductors Portfolio fund has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Fidelity Advisor Semiconductors Fund Class I seeks capital appreciation. FELIX invests primarily in common stocks. Fidelity Advisor Semiconductors Fund Class I normally invests at least 80% of assets in securities of companies principally engaged in the design, manufacture, or sale of electronic components; equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors. 

Fidelity Advisor Semiconductors Fund Class I has a track of positive total returns for over 10 years. Specifically, FELIX’s returns over the three and five-year benchmarks are 25.1% and 21.1%, respectively. Fidelity Advisor Semiconductors Fund Class I has a Zacks Mutual Fund Rank #1. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Putnam Global Technology Fund Class A aims for capital appreciation. PGTAX invests primarily in common stocks of large and mid-size companies worldwide.

Putnam Global Technology Fund Class A invests the majority of its assets in securities of companies in the technology industries. Specifically, PGTAX’s returns over the three and five-year benchmarks are 15.7% and 15.4%, respectively. Putnam Global Technology Fund Class A carries a Zacks Mutual Fund Rank #2. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

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