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3 Solid Retail Funds to Buy on Soaring Consumer Spending
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The retail sector has been suffering for the past year as price pressures have slowed sales. However, the sector has still managed to hold its ground as consumers spent lavishly despite higher interest rates.
Consumer spending, which accounts for two-thirds of the economic activity, grew a solid 2.5% in the first quarter, the Commerce Department said. In March, consumer spending rose 0.8% as consumers continued to splurge on goods and services.
After adjusting for inflation, consumer spending rose 0.5%, unchanged from February’s jump.
Higher personal income due to steadily rising wages amid a resilient labor market is allowing consumers to spend aggressively. Personal income rose 0.5% in March after increasing 0.3% in February, the Commerce Department reported.
The Federal Reserve hiked interest rates by 525 basis points to take its benchmark policy rate to the current range of 5.25-5.5% before halting hikes in July 2023. Higher interest rates have been a major challenge for several industries but the retail sector has been trying to bounce back from its earlier lows.
Retail sales totaled $709.6 billion, rising 0.7% month over month in March and surpassing the consensus estimate of an increase of 0.3%.
Consumers are expected to enjoy more purchasing power once the Federal Reserve starts its interest rate cuts, which is expected to begin in the second half of the year.
3 Best Choices
We have selected three mutual funds with significant exposure to the retail and discretionary sectors. The funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above 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 in identifying potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also 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 Retailing Portfolio (FSRPX - Free Report) fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.
Fidelity Select Retailing Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 3.5% and 13.8% over the past three and five-year periods, respectively. Fidelity Select Retailing Portfolio fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.72%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Leisure Portfolio (FDLSX - Free Report) fund 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.
Fidelity Select Leisure & Entertainment fund has a history of positive total returns for more than 10 years. Specifically, FDLSX has returned nearly 9.9% and 13.9% over the past three and five-year periods, respectively. FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%.
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 (FDFAX - Free Report) fund aims for capital growth. FDFAX invests the majority of its assets in securities of companies primarily engaged in manufacturing, marketing, or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.
Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 6% and 9.1% over the past three and five years, respectively. FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.72%.
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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3 Solid Retail Funds to Buy on Soaring Consumer Spending
The retail sector has been suffering for the past year as price pressures have slowed sales. However, the sector has still managed to hold its ground as consumers spent lavishly despite higher interest rates.
Consumer spending, which accounts for two-thirds of the economic activity, grew a solid 2.5% in the first quarter, the Commerce Department said. In March, consumer spending rose 0.8% as consumers continued to splurge on goods and services.
After adjusting for inflation, consumer spending rose 0.5%, unchanged from February’s jump.
Higher personal income due to steadily rising wages amid a resilient labor market is allowing consumers to spend aggressively. Personal income rose 0.5% in March after increasing 0.3% in February, the Commerce Department reported.
The Federal Reserve hiked interest rates by 525 basis points to take its benchmark policy rate to the current range of 5.25-5.5% before halting hikes in July 2023. Higher interest rates have been a major challenge for several industries but the retail sector has been trying to bounce back from its earlier lows.
Retail sales totaled $709.6 billion, rising 0.7% month over month in March and surpassing the consensus estimate of an increase of 0.3%.
Consumers are expected to enjoy more purchasing power once the Federal Reserve starts its interest rate cuts, which is expected to begin in the second half of the year.
3 Best Choices
We have selected three mutual funds with significant exposure to the retail and discretionary sectors. The funds carry either a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above 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 in identifying potential winners and losers. Unlike most fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance but also 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 Retailing Portfolio (FSRPX - Free Report) fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.
Fidelity Select Retailing Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 3.5% and 13.8% over the past three and five-year periods, respectively. Fidelity Select Retailing Portfolio fund has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.72%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Leisure Portfolio (FDLSX - Free Report) fund 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.
Fidelity Select Leisure & Entertainment fund has a history of positive total returns for more than 10 years. Specifically, FDLSX has returned nearly 9.9% and 13.9% over the past three and five-year periods, respectively. FDLSX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%.
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 (FDFAX - Free Report) fund aims for capital growth. FDFAX invests the majority of its assets in securities of companies primarily engaged in manufacturing, marketing, or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.
Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 6% and 9.1% over the past three and five years, respectively. FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.72%.
To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.
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 >>