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Play Alibaba's Q1 Earnings Growth With These 5 Mutual Funds

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Alibaba Group Holding Limited (BABA - Free Report) posted year-over-year growth in both earnings and revenues in fiscal first quarter of 2019. Though the bottom line missed the Zacks Consensus Estimate, the top line beat the same.

The solid quarterly performance was driven by strength in the company’s core e-commerce business. Following the encouraging performance, investing in mutual funds with a significant holding in the Chinese multinational e-commerce, retail, Internet, AI and technology conglomerate is a wise decision.

Fiscal Q1 Earnings in Focus

Alibaba Group Holding reported first-quarter fiscal 2019 earnings of $1.22 per share, missing the Zacks Consensus Estimate by 7 cents. However, earnings increased 5% year over year. Alibaba reported revenues of RMB80.9 billion ($12.23 billion), up 61% from the prior-year quarter. Also, revenues came in slightly above the Zacks Consensus Estimate of $12.25 billion.

Out of the company’s four reportable segments, Core Commerce segment’s revenues in the quarter were RMB69.2 billion (US$10.5 billion), reflecting an increase of 61% on a year-over-year basis. The increase was driven by robust growth in the company’s New Retail businesses. Cloud Computing segment’s revenues rose year-on-year, following an increase in the number of paying customers and improved revenue mix to higher valued-added services.

Digital Media and Entertainment segment’s top line was driven by an increase in revenues from mobile value-added services. Revenues in the Innovation Initiatives segment advanced year over year, driven by an increase in revenues from Tmall Genie. (Read more: Alibaba Misses Q1 Earnings Estimates, Beats Revenues)

Home Depot’s Rally Boosts Retail Sector

Additionally, out of the 27 Internet - Commerce companies, 20 have already reported earnings. Of these, 10 beat on earnings while three met estimates. Alibaba became the latest company to come up with year-over-year earnings rise and high revenue growth levels.

Additionally, the broader SPDR S&P Retail (XRT) jumped 10.6% in the last three months, becoming a strong performing sector on the S&P 500. In fact, the consumer discretionary sector’s performance is better than the S&P 500’s increase of 7.7%. Additionally, mutual funds related to the consumer discretionary sector registered strong returns. According to Morningstar, consumer defensive mutual funds returned 6.1% in the last three months.

Buy 5 Mutual Funds

Here we have selected five mutual funds that have significant exposure to the e-commerce industry and have Alibaba as one of the top six holdings. Moreover, these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without multiple commission charges that are associated with stock purchases are primarily the reasons why one should invest in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

These funds also have encouraging one-year returns and minimum initial investment within $5,000. Also, each of these funds has a low expense ratio.

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.

MassMutual Select Blue Chip Growth Services (MBCYX - Free Report) seeks appreciation of capital for the long run. MBCYX invests a huge part of its assets in common stocks of mid- and large-cap blue-chip companies that have above-average growth prospect.

MBCYX has an expense ratio of 0.85% compared with the category average of 1.08%. Moreover, MBCYX requires a minimal initial investment of $0. The fund has one-year annualized returns of 21.5%.

MBCYX has a Zacks Mutual Fund Rank #2. Further, as of the last filing, Alibaba Group is the fourth company in the top holdings for MBCYX.

American Funds Europacific Growth Fund F1 (AEGFX - Free Report) seeks capital appreciation in the long run. AEGFX invests a large chunk of its assets in common stocks of companies based in Europe and the Pacific Basin that are expected to have potential for above-average capital growth. The fund may also invest in common stocks and other securities issued by companies based in emerging markets. 

AEGFX carries an expense ratio of 0.86% compared with the category average of 1.11%. Moreover, AEGFX requires a minimal initial investment of $250. The fund has one-year annualized returns of 6.7%.

AEGFX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Alibaba Group is the sixth company in the top holdings for AEGFX.

T. Rowe Price Blue Chip Growth Advisor (PABGX - Free Report) invests the bulk of its assets in common stocks of mid- and large-cap blue chip companies, which have strong growth potential. PABGX seeks capital appreciation for the long run and stable income growth.

PABGX carries an expense ratio of 0.97% compared with the category average of 1.08%. Moreover, PABGX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 24.7%.

PABGX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Alibaba Group is the sixth company in the top holdings for PABGX.

Oppenheimer Developing Markets A (ODMAX - Free Report) invests mainly in common stocks of companies based in emerging and developing markets. The fund may invest all its assets in foreign equity securities.

ODMAX carries an expense ratio of 1.32% compared with the category average of 1.33%. Moreover, ODMAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 6.9%.

ODMAX has a Zacks Mutual Fund Rank #2. Further, as of the last filing, Alibaba Group is the top holding in ODMAX.

JHancock Blue Chip Growth 1 (JIBCX - Free Report)  invests the major portion of its assets in common stocks of large- and mid-cap blue chip growth companies. The fund invests around one-fourth of its assets in debt securities, preferred stocks, and convertible securities.

JIBCX carries an expense ratio of 0.84% compared with the category average of 1.08%. Moreover, JIBCX requires a minimal initial investment of $0. The fund has one-year annualized returns of 24.8%.

JIBCX has a Zacks Mutual Fund Rank #1. Further, as of the last filing, Alibaba Group is the sixth company in the top holdings for JIBCX.

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