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U.S. Job Additions Highest in 3 Months: 4 Fund Picks

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Following a strong show in May, with an increase in job additions and a record low jobless rate, the sentiment remains positive over U.S. job data. Recruitment remained high last month despite trade war concerns after President Trump imposed tariffs on steel and aluminum imports, and is expected to come up with more tariffs.

Steady gains in employment pushed workers’ pay higher, with average hourly wages increasing. A better-than-expected jobs report indicated a rosier economy and secured chances of more rate hikes in the coming months.

Sectors like construction, manufacturing, professional and business services, transportation, healthcare, retail trade, and mining witnessed strong job gains. In this context, investing in mutual funds that have significant exposure to these sectors is considered a strong investment choice.

Unemployment Rate Lowest Since 2000

Domestic non-farm payrolls advanced by 223,000 in May, significantly higher than the consensus estimate of 190,000, per the U.S. Bureau of Labor Statistics. This was the largest number of job additions in three months. Additionally, the unemployment rate remained unchanged at 3.8% in May, its lowest since April 2000. Moreover, the total number of unemployed is down by 772,000 or 0.5%, over the year. 

Additionally, average hourly earnings rose by 0.3% or 8 cents to $26.92 in May, higher than the consensus estimate of an increase of 0.2%. Over the year, it advanced 2.7% or 70 cents. Along with higher wages, the average workweek for all employees came in at 34.5 hours last month.

Sectors That Experienced Job Gains

The construction sector created around 25,000 jobs in May and increased by 286,000 in the last one year. Also, the manufacturing sector added around 18,000 jobs last month and advanced by 259,000 in the past 12 months. Employment in professional and business service sectors increased 23,000 and added around 206,000 jobs over the last one year.

The transportation and warehousing sector created around 19,000 jobs in May and increased by 156,000 in the past year. Additionally, employment in healthcare increased by 29,000 last month, almost in line with its average monthly gains in a year. Employment in the retail sector advanced 31,000, while the mining sector created 6,000 jobs last month.

Buy These 4 Sectoral Mutual Funds

Here we have selected four mutual funds that have significant exposure to sectors that saw strong job additions in April. All these funds have a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Further, 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.

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

FSRFX carries an expense ratio of 0.80% compared with the category average of 1.23%. Moreover, FSRFX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 15.4%.

The fund has a Zacks Mutual Fund Rank #2. Matthew Moulis is the fund manager of FSRFX since 2012. As of the last filing, Union Pacific Corp. is the top holding for FSRFX.

Northern Global Real Estate Index (NGREX - Free Report) invests a bulk of its assets in equity securities of companies included in the FTSE EPRA/NAREIT Global Index. Companies involved in ownership, construction, trading, and development of real estate are included in this index.

NGREX carries an expense ratio of 0.50% compared with the category average of 1.33%. Moreover, NGREX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 7.2%.

The fund has a Zacks Mutual Fund Rank #1. Thomas E. O'Brien is the fund manager of NGREX since 2008. As of the last filing, Simon Property Group Inc is the top holding for NGREX.

Fidelity Select Software & IT Services Portfolio (FSCSX - Free Report) invests the majority of its assets in companies whose primary operations are related to software or information-based services. FSCSX primarily focuses on acquiring common stocks of both domestic and foreign companies. The fund uses fundamental analysis to select companies for investment purposes.

FSCSX carries an expense ratio of 0.73% compared with the category average of 1.33%. Moreover, FSCSX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 26.2%.

The fund has a Zacks Mutual Fund Rank #1. Ali Khan is the fund manager of FSCSX since 2014. Further, as of the last filing, Microsoft Corp. is the top holding for FSCSX.

Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests a big part 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. The fund invests in securities of both U.S. and non-U.S. companies.

FSHCX carries an expense ratio of 0.73% compared with the category average of 1.33%. Moreover, FSHCX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 26.2%.

The fund has a Zacks Mutual Fund Rank #1. Justin Segalini is the fund manager of FSHCX since 2016. As of the last filing, UnitedHealth Group Inc is the top holding for FSHCX.

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