The Federal Reserve Bank of Philadelphia stated in its latest report that manufacturing activity in the region increased at a faster pace in July than June. The Philly Fed manufacturing index logged a 6-point growth this month buoyed by steadily improving prices of purchased inputs.

Moreover, U.S. industrial production rebounded in the month of June due to an increase in manufacturing and mining output. Investors looking to cash in on this opportunity should look no further than investing in mutual funds having significant exposure to the manufacturing sector.

U.S. Manufacturing Activity is Flourishing

The Philly Fed manufacturing index increased to 25.7% in July from 19.9% in June. When the index is above 0% it indicates factory-sector growth. Further, such an increase depicts that general business conditions in the region have been improving steadily.

The index has risen more than 30 points since January. Moreover, the prices-paid index improved to 62.9% in July from 51.8% last month. The current prices index, which depicts manufacturers’ own prices, increased 3 points. Further, the new orders index surged to 31.4% from 17.9% last month and the delivery times index improved to 11.0% from 9.6%.

The Empire State manufacturing survey, which reflects the business conditions in New York, also came in at 22.6% in July. Although the metric eased from 25.0% in June, the reading remained positive for the month. Moreover, New York Federal Reserve stated that business activity flourished at a “fairly brisk pace.” Also, the body stated that the current reading is at “still a high level.”

4 Best Funds to Buy Now

Given such positives, we have highlighted four mutual funds 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 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 Quick QuoteFCYIX - Free Report) seeks capital appreciation. FCYIX normally invests a large portion of its assets in the common stock 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 9.5% over the three-year and 11.2% 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 Mutual Fund 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 Quick QuoteFSDAX - Free Report) invests a huge portion 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 18.7% over the three-year and 17.4 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 sports a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.04%.

Fidelity Select Automotive Port (FSAVX Quick QuoteFSAVX - 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 3.5% over the three-year and 7.5% 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 Quick QuoteFSRFX - Free Report) seeks capital growth. FSRFX invests the majority 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 11.8% and 14.8% over the three-year and five-year benchmarks, respectively. 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 Mutual Fund Rank #2 and an annual expense ratio of 0.80%, which is below the category average of 1.04%.

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