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2 Mutual Funds to Buy as Manufacturing Activity Makes Steady Rebound
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The U.S. manufacturing sector is showing signs of a gradual but steady recovery. The rebound comes amid elevated inflation and concerns that interest rates could be raised in the near future, creating additional pressure for an industry that has faced challenges for several quarters.
Still, strong demand for manufactured products has helped support the sector's growth this year.
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.
Industrial Production Edges Higher
Industrial production increased 0.1% in May, following a 0.9% gain in April, according to data released by the Federal Reserve last week. The industrial production index rose to 102.6 in May from 102.5 in the previous month.
Compared with a year earlier, industrial production was up 1.7%. Manufacturing output, which is part of the broader industrial production index, reached 97.9 in May, while durable goods production advanced 0.8% from the prior month.
Although manufacturing growth moderated in May, it continued to move higher overall. The ISM Manufacturing PMI climbed to 54 in May from 52.7 in April, reaching its highest level in four years.
A PMI reading above 50 signals expansion, and May marked the fifth straight month that the index remained in expansion territory. This trend points to an ongoing recovery in the manufacturing sector and continued positive momentum.
At the same time, rising costs remain a concern. The Federal Reserve left interest rates unchanged at 3.5-3.75%, but persistent inflation worries have increased expectations that policymakers could raise rates in the coming months. Many market participants now anticipate a quarter-point rate increase before the end of the year.
Despite these challenges, strong demand for factory-produced goods continues to provide support for the manufacturing industry.
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 31.2% and 17.1% over the past three and five years, respectively, and has a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.62%, 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 13.2% and 3.3% 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 0.78%, 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 >>
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2 Mutual Funds to Buy as Manufacturing Activity Makes Steady Rebound
The U.S. manufacturing sector is showing signs of a gradual but steady recovery. The rebound comes amid elevated inflation and concerns that interest rates could be raised in the near future, creating additional pressure for an industry that has faced challenges for several quarters.
Still, strong demand for manufactured products has helped support the sector's growth this year.
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.
Industrial Production Edges Higher
Industrial production increased 0.1% in May, following a 0.9% gain in April, according to data released by the Federal Reserve last week. The industrial production index rose to 102.6 in May from 102.5 in the previous month.
Compared with a year earlier, industrial production was up 1.7%. Manufacturing output, which is part of the broader industrial production index, reached 97.9 in May, while durable goods production advanced 0.8% from the prior month.
Although manufacturing growth moderated in May, it continued to move higher overall. The ISM Manufacturing PMI climbed to 54 in May from 52.7 in April, reaching its highest level in four years.
A PMI reading above 50 signals expansion, and May marked the fifth straight month that the index remained in expansion territory. This trend points to an ongoing recovery in the manufacturing sector and continued positive momentum.
At the same time, rising costs remain a concern. The Federal Reserve left interest rates unchanged at 3.5-3.75%, but persistent inflation worries have increased expectations that policymakers could raise rates in the coming months. Many market participants now anticipate a quarter-point rate increase before the end of the year.
Despite these challenges, strong demand for factory-produced goods continues to provide support for the manufacturing industry.
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 31.2% and 17.1% over the past three and five years, respectively, and has a Zacks Mutual Fund Rank #2. The fund has an annual expense ratio of 0.62%, 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 13.2% and 3.3% 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 0.78%, 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 >>