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3 Consumer Discretionary Funds to Gain From in the Months Ahead
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The consumer discretionary sector is doing better than most others in 2023. Since the year started, the Consumer Discretionary Select Sector SPDR (XLY) has grown 17.73%, advancing 2.6% in May. With the regional-banking crisis apparently averted and debt-ceiling negotiations between the two major political parties resolved, markets have been doing well over the last six to eight weeks, and consumer discretionary stocks have made the most of it.
This is because consumer discretionary stocks are cyclical. When the economy expands, companies engaged in the business of consumer discretionaries generally see a booming business. The opposite happens when an economy shows signs of slowing down.
However, inflation has the biggest and most far-reaching impact on consumer discretionary. When prices of consumer goods are in a state of continuous increase, people rein in spending on non-essential goods. Tight monetary policy by the Federal Reserve also does not help, because it cuts into the purchasing power of consumers.
So, with headline consumer price inflation definitively slowing down in recent months and the Fed finally announcing a much-anticipated rate-hike pause in its June meeting, things are rosier for the discretionary sector, which has already done pretty well throughout the year.
Hence, astute investors should consider mutual funds focused on consumer discretionaries at present. 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).
We have thus selected three such mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio. Incidentally, all three belong to Fidelity Investments.
Fidelity Select Retailing Portfolio (FSRPX - Free Report) normally invests the majority of its assets in common stocks of companies principally engaged in merchandising finished goods and services primarily to individual consumers. FSRPX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.
As of February 2023, the top three holdings for FSRPX are 23.8% in Amazon, 11.6% in Home Depot and 7.6% in Lowe’s. Boris Shepov has been one of the lead managers for FSRPX since May 15, 2018.
FSRPX’s 3-year and 5-year annualized returns are 6.1% and 8.6%, respectively. Its net expense ratio is 0.72% compared to the category average of 0.79%. FSRPX has 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.
Fidelity Select Consumer Staples Portfolio (FDIGX - Free Report) invests the majority of its assets in securities of companies principally engaged in the manufacture, sale, or distribution of consumer staples. FDIGX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.
As of February 2023, the top three holdings for FDGIX are 14.2% in Procter & Gamble, 14.2% in Coca-Cola and 6.5% in Walmart. Ben Shuleva has been one of the lead managers for FDIGX since Dec 31, 2019.
FDIGX’s 3-year and 5-year annualized returns are 11.1% and 9.9%, respectively. Its net expense ratio is 0.74% compared to the category average of 0.76%. FDIGX has a Zacks Mutual Fund Rank #2.
Fidelity Select Leisure & Entertainment (FDLSX - Free Report) invests the majority of its assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.
As of February 2023, the top three holdings for FDLSX are 16.8% in McDonald’s, 11.5% in Booking Holdings and 7.9% in Hilton Worldwide. Kevin Francfort has been one of the lead managers for FDLSX since Sep 7, 2022.
FDLSX’s 3-year and 5-year annualized returns are 17.3% and 10%, respectively. Its net 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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3 Consumer Discretionary Funds to Gain From in the Months Ahead
The consumer discretionary sector is doing better than most others in 2023. Since the year started, the Consumer Discretionary Select Sector SPDR (XLY) has grown 17.73%, advancing 2.6% in May. With the regional-banking crisis apparently averted and debt-ceiling negotiations between the two major political parties resolved, markets have been doing well over the last six to eight weeks, and consumer discretionary stocks have made the most of it.
This is because consumer discretionary stocks are cyclical. When the economy expands, companies engaged in the business of consumer discretionaries generally see a booming business. The opposite happens when an economy shows signs of slowing down.
However, inflation has the biggest and most far-reaching impact on consumer discretionary. When prices of consumer goods are in a state of continuous increase, people rein in spending on non-essential goods. Tight monetary policy by the Federal Reserve also does not help, because it cuts into the purchasing power of consumers.
So, with headline consumer price inflation definitively slowing down in recent months and the Fed finally announcing a much-anticipated rate-hike pause in its June meeting, things are rosier for the discretionary sector, which has already done pretty well throughout the year.
Hence, astute investors should consider mutual funds focused on consumer discretionaries at present. 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).
We have thus selected three such mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy), have positive three-year and five-year annualized returns, minimum initial investments within $5000, and carry a low expense ratio. Incidentally, all three belong to Fidelity Investments.
Fidelity Select Retailing Portfolio (FSRPX - Free Report) normally invests the majority of its assets in common stocks of companies principally engaged in merchandising finished goods and services primarily to individual consumers. FSRPX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.
As of February 2023, the top three holdings for FSRPX are 23.8% in Amazon, 11.6% in Home Depot and 7.6% in Lowe’s. Boris Shepov has been one of the lead managers for FSRPX since May 15, 2018.
FSRPX’s 3-year and 5-year annualized returns are 6.1% and 8.6%, respectively. Its net expense ratio is 0.72% compared to the category average of 0.79%. FSRPX has 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.
Fidelity Select Consumer Staples Portfolio (FDIGX - Free Report) invests the majority of its assets in securities of companies principally engaged in the manufacture, sale, or distribution of consumer staples. FDIGX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.
As of February 2023, the top three holdings for FDGIX are 14.2% in Procter & Gamble, 14.2% in Coca-Cola and 6.5% in Walmart. Ben Shuleva has been one of the lead managers for FDIGX since Dec 31, 2019.
FDIGX’s 3-year and 5-year annualized returns are 11.1% and 9.9%, respectively. Its net expense ratio is 0.74% compared to the category average of 0.76%. FDIGX has a Zacks Mutual Fund Rank #2.
Fidelity Select Leisure & Entertainment (FDLSX - Free Report) invests the majority of its assets in common stocks of companies principally engaged in the design, production, or distribution of goods or services in the leisure industries. FDLSX uses fundamental analysis of factors such as each issuer's financial condition and industry position, as well as market and economic conditions, for its decisions.
As of February 2023, the top three holdings for FDLSX are 16.8% in McDonald’s, 11.5% in Booking Holdings and 7.9% in Hilton Worldwide. Kevin Francfort has been one of the lead managers for FDLSX since Sep 7, 2022.
FDLSX’s 3-year and 5-year annualized returns are 17.3% and 10%, respectively. Its net expense ratio is 0.74% compared to the category average of 0.79%. FDLSX has a Zacks Mutual Fund Rank #1.
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 >>