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6 Mutual Funds to Buy as Job Growth Hits 8-Month High

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The U.S. economy experienced strong jobs growth in February, in fact the best since July 2016. Also, the unemployment rate declined, reflecting tighter labor market conditions. Moreover, steady gains in employment pushed workers pay higher, with average hourly wages increasing last month.A better-than-expected jobs report indicated a rosier economy and cemented a rate hike in the Fed’s upcoming two-day policy meeting ending Mar 15.

Construction, manufacturing and healthcare companies led the way for job creation. In this context, we have focused on those mutual funds that have significant exposure to these three sectors. But before that, let’s take a peek into the data.

Nonfarm Payrolls Post Gains in February

According to the U.S. Bureau of Labor Statistics, domestic non-farm payrolls increased by 235,000 last month, registering its best job growth since July 2016. It was also significantly higher than the consensus estimate of 191,000 job additions. Moreover, a sharp upward revision of January’s job number indicated strong additions this year. Moreover, the unemployment rate declined from 4.8% in January to 4.7% in February. However, the labor participation rate rose from 62.9% in January to 63%.

Also, average hourly earnings rose by 6 cents to $26.09 last month, up 2.8% for the year. Average hourly earnings in manufacturing rose by 26 cents. Some other industries like information, financial activities, and education and health services increased 9 cents, 15 cents and 7 cents, respectively.

Sectors That Led to Job Gains

Construction Services

Construction employment increased by 58,000 last month, following strong job growth in civil and heavy engineering construction, and specialty trade contractors. This particular sector marked the biggest monthly rise since the recovery that began in mid-2009 and created around 177,000 jobs in the last six months.

Manufacturing Services

Employment in the sector created 28,000 jobs in February,the highest addition since August 2013.The sector also added 57,000 to the number of employed in the last three months. Food manufacturing services created 9,000 jobs, while machinery services saw around 7,000 additions. A strong rise in these two sectors helped the industry see gains in nonfarm payrolls for February.

Healthcare

Healthcare employment rose by 27,000 last month, with around 360,000 jobs created over the last 12 months. Ambulatory health care services contributed more than 18,000 jobs to the sector.Further, the broader Health CareSelect Sector SPDR (XLV) increased 9% in the last three months.

Buy These 6 Sectoral Mutual Funds

Here we have selected two mutual funds from each of the three sectors that have a Zacks Mutual Fund Rank #1 (Strong Buy).These funds have encouraging one-year annualized returns and minimum initial investment 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.

Construction Services

Fidelity Series Real Estate Income FSREX focuses on acquiring common stocks of REITs as well as debt securities from the real estate sector. FSREX may also invest in mortgage backed securities and purchase foreign securities. This fund has one-year return of 9.5%. It has an expense ratio of 0.77% as compared to the category average of 1.21%.

John Hancock II Real Estate Securities 1 JIREX invests primarily in equity securities of companies engaged in operations related to real estate sector, which also include REITs. JIREX may invest a maximum of 10% of its assets in securities of companies domiciled outside the U.S. territory. This fund has one-year return of 2.3%. It has an expense ratio of 0.78% as compared to the category average of 1.21%.

Manufacturing Services

Fidelity Select Industrial Equipment Portfolio FSCGX invests the lion’s share of its assets in the companies which are engaged in the industrial sector. FSCGX invests in both domestic and foreign companies. This fund has one-year return of 16.7%. It has an expense ratio of 0.82% as compared to the category average of 1.29%.

Fidelity Select Industrials FCYIX invests the bulk portion of its assets in securities of companies involved in manufacture, development, sales and distribution of industrial products and equipments. FCYIX invests in both U.S. and non-U.S. companies. This fund has one-year return of 20.4%. It has an expense ratio of 0.76% as compared to the category average of 1.29%.

Healthcare

Fidelity Select Medical Delivery Portfolio (FSHCX - Free Report) invests the bulk of its assets in companies that either own or are involved in operating hospital and nursing homes, and are related to the healthcare services sector. This fund has one-year return of 14.4%. It has an expense ratio of 0.77% as compared to the category average of 1.31%.

Fidelity Select Medical Equipment & Systems FSMEX invests a major portion of its assets in companies that are primarily involved in medical equipment and devices and related technologies sector. This fund has one-year return of 27.6%. It has an expense ratio of 0.75% as compared to the category average of 1.31%.

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