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2 Funds to Buy as Manufacturing Activity Roars Back to 4-Year High
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The U.S. manufacturing sector is showing solid signs of recovery after facing challenges for months. Despite rising supply constraints in recent weeks, manufacturing activity accelerated in May, marking the fourth consecutive month of growth.
The sector has delivered an encouraging performance throughout 2026. While rising costs continue to pose challenges, strong customer demand has helped drive manufacturing growth.
Against this improving backdrop, investors may want to consider funds like Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) and Fidelity Select Automotive Portfolio (FSAVX - Free Report) that are likely to benefit in the near term.
Manufacturing Activity Continues to Expand
The ISM Manufacturing PMI climbed to 54 in May, its highest level in four years, up from 52.7 in April and ahead of analysts’ expectations of 53.
A PMI reading above 50 signals expansion, and May marked the fifth straight month that the index remained above that threshold, suggesting that the manufacturing sector is experiencing a steady recovery. Although President Donald Trump's aggressive tariff policies weighed on the industry last year, strong demand has continued to support growth.
Sixteen industries reported expansion in May, with textile mills leading the way. Other sectors, including electrical equipment, paper products, and appliances, also posted solid gains. While tariffs remain a concern, the New Orders Index rose for the fifth consecutive month to 56.8%, up from 54.1% in April. Meanwhile, the Production Index increased to 54.3%, improving 0.9% from the previous month.
Oil prices have jumped nearly 40% since the start of the Iran conflict, contributing to higher inflation pressures. However, investors remain optimistic that tensions could ease, as Trump recently suggested that a decision regarding an end to the war may be approaching.
2 Best Choices
We have, thus, selected two mutual funds with significant exposure to the manufacturing sector, each carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Defense & Aerospace Portfolio fund invests a huge portion of its assets in the securities of companies involved primarily in the research, manufacturing, and sale of products and services in the defense or aerospace industries. FSDAX seeks capital growth by investing in both U.S. and non-U.S. companies.
Fidelity Select Defense & Aerospace Portfolio fund has a history of positive total returns for over 10 years. FSDAX has returned 26.3% and 15.9% over the past three and five years, respectively, and has a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.64%, which is lower than the category average.
To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Automotive Portfolio fund aims for capital appreciation. FSAVX invests most of its assets in common stocks of companies engaged in manufacturing automobiles, trucks, specialty vehicles, parts, tires and related services.
Fidelity Select Automotive Portfolio fund has a history of positive total returns for over 10 years. FSAVX has returned 13.1% and 3.5% over the past three and five years, respectively. Fidelity Select Automotive Portfolio fund has a Zacks Mutual Fund Rank #2 and an expense ratio of 0.79%, which is lower than the category average of 0.92%.
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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2 Funds to Buy as Manufacturing Activity Roars Back to 4-Year High
The U.S. manufacturing sector is showing solid signs of recovery after facing challenges for months. Despite rising supply constraints in recent weeks, manufacturing activity accelerated in May, marking the fourth consecutive month of growth.
The sector has delivered an encouraging performance throughout 2026. While rising costs continue to pose challenges, strong customer demand has helped drive manufacturing growth.
Against this improving backdrop, investors may want to consider funds like Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) and Fidelity Select Automotive Portfolio (FSAVX - Free Report) that are likely to benefit in the near term.
Manufacturing Activity Continues to Expand
The ISM Manufacturing PMI climbed to 54 in May, its highest level in four years, up from 52.7 in April and ahead of analysts’ expectations of 53.
A PMI reading above 50 signals expansion, and May marked the fifth straight month that the index remained above that threshold, suggesting that the manufacturing sector is experiencing a steady recovery. Although President Donald Trump's aggressive tariff policies weighed on the industry last year, strong demand has continued to support growth.
Sixteen industries reported expansion in May, with textile mills leading the way. Other sectors, including electrical equipment, paper products, and appliances, also posted solid gains. While tariffs remain a concern, the New Orders Index rose for the fifth consecutive month to 56.8%, up from 54.1% in April. Meanwhile, the Production Index increased to 54.3%, improving 0.9% from the previous month.
Oil prices have jumped nearly 40% since the start of the Iran conflict, contributing to higher inflation pressures. However, investors remain optimistic that tensions could ease, as Trump recently suggested that a decision regarding an end to the war may be approaching.
2 Best Choices
We have, thus, selected two mutual funds with significant exposure to the manufacturing sector, each carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.
The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).
Fidelity Select Defense & Aerospace Portfolio fund invests a huge portion of its assets in the securities of companies involved primarily in the research, manufacturing, and sale of products and services in the defense or aerospace industries. FSDAX seeks capital growth by investing in both U.S. and non-U.S. companies.
Fidelity Select Defense & Aerospace Portfolio fund has a history of positive total returns for over 10 years. FSDAX has returned 26.3% and 15.9% over the past three and five years, respectively, and has a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.64%, which is lower than the category average.
To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Automotive Portfolio fund aims for capital appreciation. FSAVX invests most of its assets in common stocks of companies engaged in manufacturing automobiles, trucks, specialty vehicles, parts, tires and related services.
Fidelity Select Automotive Portfolio fund has a history of positive total returns for over 10 years. FSAVX has returned 13.1% and 3.5% over the past three and five years, respectively. Fidelity Select Automotive Portfolio fund has a Zacks Mutual Fund Rank #2 and an expense ratio of 0.79%, which is lower than the category average of 0.92%.
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 >>