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4 Funds to Cheer on Best Industrial Output in 11 Months
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Since the beginning of the year, producers have been found struggling due to low commodity prices, a stronger dollar and lackluster global economic growth. But, these factors have subsided allowing manufacturers to find their footing last month.
An uptick in automobile production along with improvement in domestic demand helped industrial output to post its strongest advance in June since July last year. In this scenario, it will be judicious to invest in mutual funds that focus on the industrial sector.
Fastest Industrial Production in 11 Months
Into the second half of the year, the once battered domestic industrial sector is showing signs of life. In June, U.S. industrial output expanded at the fastest monthly rate in 11 months. Industrial output that comprises almost everything including manufacturing, mining, and electric and gas utilities increased 0.6%, a turnaround from a 0.3% decline in May.
Industrial output bounced back last month after a downturn over the past 18 months mostly due to weak overseas demand for many products and a stronger dollar. June saw an increase in domestic appetite for motor vehicle and parts production, primarily a volatile category that slipped in May. Output of automotive products went up 0.7%. Similarly, output of computers, electronics and appliances increased 1.5%, while production of business equipment rose 0.7%.
Another welcome news for the beleaguered sector is that mining including energy production went up 0.2%. An almost two-year drop in commodity prices had led energy companies to trim jobs and slash investments. Like mining, the index for utilities also gained 2.4%.
Capacity utilization, a measure of how much industries are making as a share of potential output, also rose to 75.4% in June from an unrevised 74.9% in May. This suggested that there is still room for the sector to ramp up (read: Manufacturing in the U.S. Gains More Than Forecast in June).
Manufacturing Indexes Hit Record Highs
Manufacturing activity rose last month as indicated by both the ISM and PMI manufacturing surveys. According to the Institute for Supply Management, manufacturing activity climbed to 53.2 in June from 51.3 in May, its highest level since Feb 2015. Any reading above 50 suggests expansion.
U.S. factory activity registered broad-based growth in June, with 13 out of the 18 industries surveyed reported growth, including primary metals and textiles. Indexes on both new orders and production also went up in June, expanding for the past six months.
In line with the ISM manufacturing report, financial data firm Markit also reported that its final U.S. Manufacturing Purchasing Managers Index came in at 51.3 in June, up from 50.7 in May. Thanks to such upbeat reports, manufacturers are seeing brighter prospects ahead. Moreover, Chris Williamson, Markit's chief economist, added that “the upturn in the employment index suggests that firms may be expecting the recent bout of weak demand to be temporary.” (Read: 4 Mutual Funds to Ride Sturdy Manufacturing Data)
Conditions Favor Industrials
Most of the firms cater to the domestic market and, hence, are insulated from global market turmoil including Brexit woes. U.K.’s decision to leave the European Union will have a negligible impact on their spending plans. Such manufacturers mostly include auto makers and chemical producers. In fact, manufacturers related to the auto industry are reaping the benefits of low gasoline prices.
The depressed energy sector is seeing signs of recovery banking on the rise in oil prices. The adverse effects of low commodity prices that had hampered demand for mining, drilling and farming equipment are now easing. Additionally, the negative impact of a stronger dollar is fading, while weak economic growth in the emerging markets is also less pronounced.
Buy 4 Top Industrial Mutual Funds Now
Given these promising signs, it seems that the industrial sector is recouping from its torrid times. That too, when the global markets are reeling from a serious case of “Brexit Blues.” Hence, investing in mutual funds having exposure to the said sector won’t be a bad proposition.
We have chosen four industrial mutual funds that not only boast strong fundamentals but also have given solid returns over a long period of time. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive year-to-date and 5-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio.
Funds have been selected over stocks, since funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear (read: The Advantages Of Mutual Funds).
Fidelity Select Transportation (FSRFX - Free Report) invests a large portion of its assets in securities of companies principally engaged in the design, manufacture, distribution, or sale of transportation equipment. FSRFX’s year-to-date and 5-year annualized returns are 10.1% and 13.1%, respectively. FSRFX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.8% is lower than the category average of 1.23%.
Fidelity Select Industrials (FCYIX - Free Report) invests the majority of its assets in securities of companies principally engaged in the research, development, manufacture, distribution, supply or sale of industrial products, services, or equipment. FCYIX’s year-to-date and 5-year annualized returns are 8.4% and 11.4%, respectively. FCYIX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.76% is lower than the category average of 1.23%.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) invests a major portion of its assets in securities of companies principally engaged in the research, manufacture, or sale of products or services related to the defense or aerospace industries. FSDAX’s year-to-date and 5-year annualized returns are 6.7% and 13.2%, respectively. FSDAX carries a Zacks Mutual Fund Rank #2 and the annual expense ratio of 0.79% is lower than the category average of 1.23%.
Fidelity Select Industrial Equipment Portfolio invests a large portion of its assets in securities of companies principally engaged in the manufacture, distribution, or service of products and equipment for the industrial sector. FSCGX’s year-to-date and 5-year annualized returns are 8.6% and 10%, respectively. FSCGX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.82% is lower than the category average of 1.23%.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.
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4 Funds to Cheer on Best Industrial Output in 11 Months
Since the beginning of the year, producers have been found struggling due to low commodity prices, a stronger dollar and lackluster global economic growth. But, these factors have subsided allowing manufacturers to find their footing last month.
An uptick in automobile production along with improvement in domestic demand helped industrial output to post its strongest advance in June since July last year. In this scenario, it will be judicious to invest in mutual funds that focus on the industrial sector.
Fastest Industrial Production in 11 Months
Into the second half of the year, the once battered domestic industrial sector is showing signs of life. In June, U.S. industrial output expanded at the fastest monthly rate in 11 months. Industrial output that comprises almost everything including manufacturing, mining, and electric and gas utilities increased 0.6%, a turnaround from a 0.3% decline in May.
Industrial output bounced back last month after a downturn over the past 18 months mostly due to weak overseas demand for many products and a stronger dollar. June saw an increase in domestic appetite for motor vehicle and parts production, primarily a volatile category that slipped in May. Output of automotive products went up 0.7%. Similarly, output of computers, electronics and appliances increased 1.5%, while production of business equipment rose 0.7%.
Another welcome news for the beleaguered sector is that mining including energy production went up 0.2%. An almost two-year drop in commodity prices had led energy companies to trim jobs and slash investments. Like mining, the index for utilities also gained 2.4%.
Capacity utilization, a measure of how much industries are making as a share of potential output, also rose to 75.4% in June from an unrevised 74.9% in May. This suggested that there is still room for the sector to ramp up (read: Manufacturing in the U.S. Gains More Than Forecast in June).
Manufacturing Indexes Hit Record Highs
Manufacturing activity rose last month as indicated by both the ISM and PMI manufacturing surveys. According to the Institute for Supply Management, manufacturing activity climbed to 53.2 in June from 51.3 in May, its highest level since Feb 2015. Any reading above 50 suggests expansion.
U.S. factory activity registered broad-based growth in June, with 13 out of the 18 industries surveyed reported growth, including primary metals and textiles. Indexes on both new orders and production also went up in June, expanding for the past six months.
In line with the ISM manufacturing report, financial data firm Markit also reported that its final U.S. Manufacturing Purchasing Managers Index came in at 51.3 in June, up from 50.7 in May. Thanks to such upbeat reports, manufacturers are seeing brighter prospects ahead. Moreover, Chris Williamson, Markit's chief economist, added that “the upturn in the employment index suggests that firms may be expecting the recent bout of weak demand to be temporary.” (Read: 4 Mutual Funds to Ride Sturdy Manufacturing Data)
Conditions Favor Industrials
Most of the firms cater to the domestic market and, hence, are insulated from global market turmoil including Brexit woes. U.K.’s decision to leave the European Union will have a negligible impact on their spending plans. Such manufacturers mostly include auto makers and chemical producers. In fact, manufacturers related to the auto industry are reaping the benefits of low gasoline prices.
The depressed energy sector is seeing signs of recovery banking on the rise in oil prices. The adverse effects of low commodity prices that had hampered demand for mining, drilling and farming equipment are now easing. Additionally, the negative impact of a stronger dollar is fading, while weak economic growth in the emerging markets is also less pronounced.
Buy 4 Top Industrial Mutual Funds Now
Given these promising signs, it seems that the industrial sector is recouping from its torrid times. That too, when the global markets are reeling from a serious case of “Brexit Blues.” Hence, investing in mutual funds having exposure to the said sector won’t be a bad proposition.
We have chosen four industrial mutual funds that not only boast strong fundamentals but also have given solid returns over a long period of time. These funds possess a Zacks Mutual Fund Rank #1 (Strong Buy) or #2 (Buy), have positive year-to-date and 5-year annualized returns, minimum initial investments within $5000 and carry a low expense ratio.
Funds have been selected over stocks, since funds reduce transaction costs for investors. Funds also diversify their portfolio without the numerous commission charges that stocks need to bear (read: The Advantages Of Mutual Funds).
Fidelity Select Transportation (FSRFX - Free Report) invests a large portion of its assets in securities of companies principally engaged in the design, manufacture, distribution, or sale of transportation equipment. FSRFX’s year-to-date and 5-year annualized returns are 10.1% and 13.1%, respectively. FSRFX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.8% is lower than the category average of 1.23%.
Fidelity Select Industrials (FCYIX - Free Report) invests the majority of its assets in securities of companies principally engaged in the research, development, manufacture, distribution, supply or sale of industrial products, services, or equipment. FCYIX’s year-to-date and 5-year annualized returns are 8.4% and 11.4%, respectively. FCYIX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.76% is lower than the category average of 1.23%.
Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) invests a major portion of its assets in securities of companies principally engaged in the research, manufacture, or sale of products or services related to the defense or aerospace industries. FSDAX’s year-to-date and 5-year annualized returns are 6.7% and 13.2%, respectively. FSDAX carries a Zacks Mutual Fund Rank #2 and the annual expense ratio of 0.79% is lower than the category average of 1.23%.
Fidelity Select Industrial Equipment Portfolio invests a large portion of its assets in securities of companies principally engaged in the manufacture, distribution, or service of products and equipment for the industrial sector. FSCGX’s year-to-date and 5-year annualized returns are 8.6% and 10%, respectively. FSCGX carries a Zacks Mutual Fund Rank #1 and the annual expense ratio of 0.82% is lower than the category average of 1.23%.
About Zacks Mutual Fund Rank
By applying the Zacks Rank to mutual funds, investors can find funds that not only outpaced the market in the past but are also expected to outperform going forward. Pick the best mutual funds with the help of Zacks Rank.