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Dow Sails Above 21,000 Level: Buy 4 Mutual Funds

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Trump adopted a more “presidential” tone in his Tuesday night speech, charging up investors. All key indexes registered record gains with the Dow steering past the 21,000 mark and matching its fastest 1000-point march on Mar 1. Although Trump refrained from making any specific announcement about his economic plans, his gradual shift from an abrasive tone boosted investor sentiment.

Stable gains in companies from a bunch of sectors over the last one month gave a boost to the blue-chip index and other major benchmarks. Mutual funds with significant exposure to some of these blue-chip companies can be considered as wise investment choices. This is because rising hopes of higher economic growth and the strong financial position of blue-chip companies are expected to have a positive impact on such mutual funds.

Dow Remains Above 21,000

The Dow increased more than 300 points to move past the psychological level of 21,000 for the first time on March 1. Although markets cooled down yesterday, the blue-chip index has been on an extended bull run and gained 1.8% or more than 375 points over the last five sessions. Investors’ optimism regarding Trump’s proposed economic policies, including job creations, tax cuts, repealing regulations and pickup in infrastructure outlays have helped to boost stocks higher.

Further, sectors like industrials, financials, healthcare and materials managed to register attractive gains over the last one month despite a weak session on Thursday. Industrial Select Sector SPDR (XLI), Financial Select Sector SPDR (XLF), Health Care Select Sector SPDR (XLV) and Materials Select Sector SPDR (XLB) rose 4.9%, 6.9%, 6.2% and 1.4%, respectively.

Why is a Trump Presidency Good for Markets?

Donald Trump is in favour of increasing public spending on infrastructure by a trillion dollars over the next decade. In fact, he is expected to offer $137 billion in tax credits to private construction companies for undertaking infrastructure projects. Trump’s spending proposals and tax policies are likely to benefit industrial companies substantially.

Further, Trump may amend Dodd-Frank regulations and raise the minimum asset threshold for banking behemoths to $250 billion from $50 billion. This will boost valuation and bring more flexibility to such companies. Rising Fed rate hike chances this month also had a positive impact on blue-chip banks.

Additionally, Trump is expected to replace the existing Affordable Care Act, with a new healthcare legislation, which might eventually boost profitability in the healthcare sector. Further, his de-regulation policies, specifically the removal of environmental regulations, are likely to boost the materials and conventional power sectors.

Buy These 4 Mutual Funds

Here we have selected one mutual fund from each of the four sectors – industrials, financials, healthcare and materials – that have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy).Moreover, we have focused on sector-based funds that have some major blue-chip companies in their top 10 holdings. These funds have encouraging 3-month returns and their minimum initial investment is within $5000. Also, these funds have low expense ratios.

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.

Fidelity Select Industrials (FCYIX - Free Report) seeks capital growth by investing a major portion of its assets in securities of companies involved in manufacture, development, sales and distribution of industrial products and equipment.

The fund has 3-month return of 6.5%, and an expense ratio of 0.76% as compared to the category average of 1.30%. FCYIX has a Zacks Mutual Fund Rank #1. Also, there are two Dow components, General Electric Company (GE - Free Report) and United Technologies Corporation in its top 10 holdings.

Fidelity Select Financial Services Portfolio (FIDSX - Free Report) invests the lion’s share of its assets in common stocks of companies involved in offering financial services to industry and consumers. FIDSX seeks appreciation of capital.

The fund has 3-month return of 10.4%, and an expense ratio of 0.75% as compared to the category average of 1.56%. FIDSX has a Zacks Mutual Fund Rank #1. Further, there are two Dow components, Goldman Sachs Group Inc (GS - Free Report) and JPMorgan Chase & Co. (JPM - Free Report) in its top 10 holdings.

Fidelity Select Health Care (FSPHX - Free Report) invests the bulk of its assets in securities of companies principally engaged in the design, manufacture, or sale of products or services used for or in connection with health care or medicine. 

The fund has 3-month return of 16.2%, and an expense ratio of 0.72% as compared to the category average of 1.34%. FSPHX has a Zacks Mutual Fund Rank #2. Also, there is one Dow component, UnitedHealth Group Incorporated (UNH - Free Report) in its top 10 holdings.

Fidelity Select Environment and Alternate Energy Portfolio (FSLEX - Free Report) invests more than 80% of its assets in companies which are involved in business activates relating to water infrastructure, pollution control, renewable and alternative energy.

The fund has 3-month return of 9.7%, and an expense ratio of 0.95% as compared to the category average of 1.30%. FSLEX has a Zacks Mutual Fund Rank #2. Further, there is one Dow component, 3M (MMM - Free Report) in its top 10 holdings.

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