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4 Top Mutual Funds to Gain on Signs of Cooling Inflation
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The U.S. stock market has shown signs of recovery in 2023 after a deplorable period that started in late 2021 mostly on account of rising domestic inflation. The Federal Reserve’s aggressive monetary policy tightening in response to rising inflation has started to reap results. The Consumer Price Index (CPI) for the month of December dived to 6.5% after record highs in September and August 2022.
The Producer Price Index (PPI) for the month of December decreased by 0.5% mostly due to the decline in the cost of energy and food products. On a year-on-year basis, PPI climbed 6.2% in December as compared to 7.3% in November. These numbers offer more evidence that inflation is receding.
The Fed on Wednesday announced a 0.25 percentage point interest rate hike from the recent signs of cooling inflation. Investors expect that the Fed could adopt a smaller increase in a rate hike as Jerome Powell’s comments recognize easing inflation. However, the interest rate is expected to stay high to fight inflation as the Fed’s inflation target is far from met.
Technology stocks have historically underperformed as compared to the other sectors during the rising inflation period. Interest rates have an inverse relationship with the valuations of technology stocks. Rising interest rates make finance operations more expensive for new-age technology companies that are in the cash-burning stage for achieving higher growth and market share.
The consumer discretionary industry comprises companies that manufacture goods or provide services that consumers want but are not necessary, like clothing, luxury brands, and travel-related requirements. High inflation and increased energy cost have pinched the pockets of many Americans for much of 2022. So, with a dip in prices, it is expected that the purchasing power will increase and demand for discretionary products will shine again.
Hence, with dipping inflation, and a favorable interest rate, it is more likely that the technology and consumer discretionary industry as a whole will perform well and reward investors. Also, the gradual reopening from the COVID-19 crisis and aggressive vaccination is likely to smoothen transportation and supply-chain function.
Thus, from an investment standpoint, we have selected four technology and consumer discretionary mutual funds to invest in that are expected to give a positive return amid easing inflation. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds, by the way, have given impressive 3-year and 5-year returns as well, boast a Zacks Mutual Fund Rank #1 (Strong Buy) offer a minimum initial investment within $5,000, and carry a low expense ratio compared to the category average.
Fidelity Select Construction and Housing Portfolio (FSHOX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design and construction of residential, commercial, industrial, and public works facilities, as well as companies engaged in the manufacture, supply, distribution, or sale of construction and housing products or services. FSHOX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Jordan Michaels has been the lead manager of FSHOX since Sep 7, 2021, and most of the fund’s holdings were in companies like Home Depot (17.47%), Lowe’s Companies (16.2%), and Johnson Controls International (5.79%) as of Aug 31, 2022.
FSHOX’s 3-year and 5-year returns are 15.2% and 12.7%, respectively. The annual expense ratio is 0.76% compared to the category average of 0.79%. FSHOX 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 (FELIX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FELIX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FELIX since Mar 16, 2020, and most of the fund’s holdings were in companies like Nvidia Corporation (21.06%), NXP Semiconductors (9.22%), and Marvell Technology (8.73%) as of Jul 31, 2022.
FELIX’s 3-year and 5-year returns are 14.1% and 16.4%, respectively. The annual expense ratio of 0.74% is lower than the category average of 1.05%. FELIX has a Zacks Mutual Fund Rank #1.
Black Oak Emerging Technology Fund (BOGSX - Free Report) invests most of its net assets in equity securities of emerging technology companies, as determined by the Advisor. BOGSX advisors choose to invest in stocks that are well-positioned to become market leaders.
Robert D. Stimpson has been the lead manager of BOGSX since Apr 7, 2006, and most of the fund’s holdings were in companies like Apple Incorporated (5.73%), Cirrus Logic (5.02%), and Solaredge Technologies (4.79%) as of Jul 31, 2022.
BOGSX’s 3-year and 5-year returns are 10.2% and 11.9%, respectively. The annual expense ratio is 1.0% compared to the category average of 1.05%. BOGSX has a Zacks Mutual Fund Rank #1.
Fidelity Select Leisure & Entertainment (FDLSX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
William Hilkert has been the lead manager of FDLSX since Aug 17, 2020, and most of the fund’s holdings were in companies like Mcdonald’s Corporation (17.42%), Booking Holdings (12.77%) and Marriott International (7.96%) as of Aug 31, 2022.
FDLSX’s 3-year and 5-year returns are 6.8% and 7.8%, respectively. The annual expense ratio is 0.74% compared to the category average of 0.79%. FDLSX has a Zacks Mutual Fund Rank #1.
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4 Top Mutual Funds to Gain on Signs of Cooling Inflation
The U.S. stock market has shown signs of recovery in 2023 after a deplorable period that started in late 2021 mostly on account of rising domestic inflation. The Federal Reserve’s aggressive monetary policy tightening in response to rising inflation has started to reap results. The Consumer Price Index (CPI) for the month of December dived to 6.5% after record highs in September and August 2022.
The Producer Price Index (PPI) for the month of December decreased by 0.5% mostly due to the decline in the cost of energy and food products. On a year-on-year basis, PPI climbed 6.2% in December as compared to 7.3% in November. These numbers offer more evidence that inflation is receding.
The Fed on Wednesday announced a 0.25 percentage point interest rate hike from the recent signs of cooling inflation. Investors expect that the Fed could adopt a smaller increase in a rate hike as Jerome Powell’s comments recognize easing inflation. However, the interest rate is expected to stay high to fight inflation as the Fed’s inflation target is far from met.
Technology stocks have historically underperformed as compared to the other sectors during the rising inflation period. Interest rates have an inverse relationship with the valuations of technology stocks. Rising interest rates make finance operations more expensive for new-age technology companies that are in the cash-burning stage for achieving higher growth and market share.
The consumer discretionary industry comprises companies that manufacture goods or provide services that consumers want but are not necessary, like clothing, luxury brands, and travel-related requirements. High inflation and increased energy cost have pinched the pockets of many Americans for much of 2022. So, with a dip in prices, it is expected that the purchasing power will increase and demand for discretionary products will shine again.
Hence, with dipping inflation, and a favorable interest rate, it is more likely that the technology and consumer discretionary industry as a whole will perform well and reward investors. Also, the gradual reopening from the COVID-19 crisis and aggressive vaccination is likely to smoothen transportation and supply-chain function.
Thus, from an investment standpoint, we have selected four technology and consumer discretionary mutual funds to invest in that are expected to give a positive return amid easing inflation. Mutual funds, in general, reduce transaction costs and diversify portfolios without an array of commission charges that are mostly associated with stock purchases (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
These funds, by the way, have given impressive 3-year and 5-year returns as well, boast a Zacks Mutual Fund Rank #1 (Strong Buy) offer a minimum initial investment within $5,000, and carry a low expense ratio compared to the category average.
Fidelity Select Construction and Housing Portfolio (FSHOX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design and construction of residential, commercial, industrial, and public works facilities, as well as companies engaged in the manufacture, supply, distribution, or sale of construction and housing products or services. FSHOX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Jordan Michaels has been the lead manager of FSHOX since Sep 7, 2021, and most of the fund’s holdings were in companies like Home Depot (17.47%), Lowe’s Companies (16.2%), and Johnson Controls International (5.79%) as of Aug 31, 2022.
FSHOX’s 3-year and 5-year returns are 15.2% and 12.7%, respectively. The annual expense ratio is 0.76% compared to the category average of 0.79%. FSHOX 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 (FELIX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are engaged in the design, manufacture, or sale of semiconductors and semiconductor equipment. FELIX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
Adam Benjamin has been the lead manager of FELIX since Mar 16, 2020, and most of the fund’s holdings were in companies like Nvidia Corporation (21.06%), NXP Semiconductors (9.22%), and Marvell Technology (8.73%) as of Jul 31, 2022.
FELIX’s 3-year and 5-year returns are 14.1% and 16.4%, respectively. The annual expense ratio of 0.74% is lower than the category average of 1.05%. FELIX has a Zacks Mutual Fund Rank #1.
Black Oak Emerging Technology Fund (BOGSX - Free Report) invests most of its net assets in equity securities of emerging technology companies, as determined by the Advisor. BOGSX advisors choose to invest in stocks that are well-positioned to become market leaders.
Robert D. Stimpson has been the lead manager of BOGSX since Apr 7, 2006, and most of the fund’s holdings were in companies like Apple Incorporated (5.73%), Cirrus Logic (5.02%), and Solaredge Technologies (4.79%) as of Jul 31, 2022.
BOGSX’s 3-year and 5-year returns are 10.2% and 11.9%, respectively. The annual expense ratio is 1.0% compared to the category average of 1.05%. BOGSX has a Zacks Mutual Fund Rank #1.
Fidelity Select Leisure & Entertainment (FDLSX - Free Report) invests most of its net assets in common stocks of domestic and foreign companies that are principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX advisors choose to invest in stocks based on fundamental analysis factors such as the issuer's financial condition, industry position, as well as market and economic conditions.
William Hilkert has been the lead manager of FDLSX since Aug 17, 2020, and most of the fund’s holdings were in companies like Mcdonald’s Corporation (17.42%), Booking Holdings (12.77%) and Marriott International (7.96%) as of Aug 31, 2022.
FDLSX’s 3-year and 5-year returns are 6.8% and 7.8%, respectively. The annual expense ratio is 0.74% compared to the category average of 0.79%. FDLSX has a Zacks Mutual Fund Rank #1.
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Zacks’ free Fund Newsletter will brief you on top news and analysis, as well as top-performing mutual funds, each week. Get it free >>