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4 Mutual Funds to Buy as U.S. Business Spending Surges

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Business spending on capital goods in the United States witnessed a surge in April. Per the latest data from the U.S. Department of Commerce, new orders for capital goods made within the shores of the United States, increased in April from March. Such a rebound indicates improvement in demand for these goods. Further, factory orders also touched a 45-year high in May.

The Republican tax overhaul policy and steadily rising oil prices have resulted in increased business spending. Interestingly, the Trump administration has hinted at a fresh round of tax cuts prior to the midterm election to be held in November.

Investors looking to make the most out of such circumstances should bet on mutual funds invested in capital-intensive sectors.

Increased Capital Equipment Orders Boost Business Spending

On a year-over-year basis, core capital goods orders surged 6.6% last month, beating the market estimate of 0.7% growth. Excluding civilian aircraft and machinery, growth in equipment orders were broad-based. Such growth was achieved on the back of increased orders for electrical equipment, metals and computers.

Further, orders for defense capital goods ticked up 3.1% last month. Excluding aircraft, non-military capital goods orders increased 1% month over month against a decline of 0.9% in March. Also, shipments of core capital goods were up 0.8%, while it fell 0.7% in March.

Finally, orders for appliances, electrical equipment and components increased 2.6%, outshining the 2.4% growth achieved in March. Electronic products and computers orders were also up 1.1%, on a month-over-month basis.

Factors Supporting the Growth in Business Spending

President Trump’s landmark $1.5 trillion Tax Cuts and Jobs Act has largely resulted in increased business spending, particularly on capital and durable goods. Moreover, provision for additional tax holiday to U.S. corporations on repatriated profits held abroad has assisted in improving the liquidity of American firms.

Further, it is largely expected that the tax cuts would boost investment in capital-intensive industries. Also, spending on new equipment and capital goods would witness a surge in the days to come. Finally, if additional tax cuts are introduced by November, investment in corporate capital equipment would get a boost.

4 Best Funds to Buy Now

Given such positives, we have highlighted four industrial mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging three and one-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 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.

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 Industrials Fund (FCYIX - Free Report) seeks capital appreciation. FCYIX normally invests a huge portion of its assets in common stocks of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.3% over the three-year and 11.9% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FCYIX has a Zacks Rank #1 and an annual expense ratio of 0.77%, which is below the category average of 1.04%.

Fidelity Select Defense & Aerospace Portfolio (FSDAX - Free Report) invests a chunk of its assets in securities of companies involved primarily in the research, manufacture and sale of products and services as per the defense or aerospace industries. The fund seeks capital growth by investing in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 17.5% over the three-year and 18.8% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSDAX has a Zacks Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.04%.

Fidelity Select Automotive Port (FSAVX - Free Report) seeks capital appreciation. This fund invests the majority of its assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires and related services.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 2.7% over the three-year and 9% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSAVX has a Zacks Rank #2 and an annual expense ratio of 0.96%, which is below the category average of 1.17%.

Fidelity Select Transportation (FSRFX - Free Report) seeks capital growth. FSRFX invests most of its assets in securities of companies involved in design, manufacture and sale of transportation equipment and provide transportation services. The non-diversified fund invests in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.4% over the three-year and 15.1% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSRFX has a Zacks Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.04%.

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