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Industrial Production Up For Third Straight Month: 4 Funds
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Industrial production increased considerably in August, following an increase in production of motor vehicles and parts. Additionally, output related to utilities and mining also rose, which also supported the surge in manufacturing output.
Given these positive trends, the addition of mutual funds that have significant exposure to the industrials and utilities sector could be a prudent decision. Now, we will take a glance at the encouraging data that raised hopes for these sectors for the coming months.
Industrial Production Rebounds
Industrial production in August moved higher and July’s figure was also revised upward to 0.4%. The Board of Governors of the Federal Reserve System reported that industrial production increased 0.4% in August, exceeding the consensus expectation of a 0.3% increase. Output jumped 4.9% in the last 12 months, closing near the highest annual growth last seen in 2010.
Also, capacity utilization advanced from 77.9% to 78.1% last month. Although capacity utilization remained below its long-run (1972–2016) average by 1.7%, it posted growth of 1.7% in the last one year. Moreover, with recent economic data like ISM Manufacturing Index and new orders remaining upbeat, it is expected that economy will be able to expand output gradually.
Auto Output Touch Best Level Since April
Manufacturing output advanced, mainly on the back of a 4% increase in production of motor vehicles and parts. Motor vehicle assemblies climbed to 11.5 million units annually, its highest figure since April. Additionally, the utilities production rose 1.2%, while mining output advanced 0.7%. Increase in electricity usage in August boosted utilities production, while a sharp rise in oil and natural gas production benefited mining production.
Separately, the manufacturing index increased from 58.1% in July to 61.3% in August, scaling a two-month high, according to the Institute of Supply Management (ISM). The improvement was largely driven by strength in new orders, which jumped from 60.2% in July to 65.1% in August.
Also, Production, Supplier Deliveries and Inventories Indexes climbed 4.8 percentage points, 2.4 percentage points and 2.1 percentage points month over month to 63.3%, 64.5% and 55.4%, respectively. (Read More: 3 Fidelity Funds to Ride Best Manufacturing Boom Since 2004)
Buy These 4 Mutual Funds
As discussed above, recent data related to the industrials sector clearly indicate growth. This is borne out by the fact that the Industrial Select Sector SPDR (XLI) and Utilities Select Sector SPDR (XLU) respectively gained 3.7% and 8.1% in the past six months. Additionally, mutual funds related to this sector registered strong returns. According to Morningstar, the industrials and utilities mutual fund posted year-to-date returns of 5.7% and 5.9%, respectively.
Against this encouraging backdrop, we have selected four industrial mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have impressive one-year annualized. These also have minimum initial investment within $5000 and 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 Industrials (FCYIX - Free Report) seeks capital growth by investing mainly in equity securities. FCYIX invests a huge portion of its assets in securities of companies involved in manufacture, development, sale and distribution of industrial products and equipment. The fund invests in both U.S. and non-U.S. companies.
FCYIX carries an expense ratio of 0.77% compared with the category average of 1.22%. Moreover, FCYIX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 16.5%.
The fund carries a Zacks Mutual Fund Rank #1. Tobias W. Welo is the fund manager of FCYIX since 2007. Further, as of the last filing, United Technologies is the top holding for FCYIX.
Wells Fargo Utility and Telecommunications A (EVUAX - Free Report) invests heavily in common and preferred stocks and investment-grade debt securities of utilities and telecom service providers. EVUAX also invests around 35% of its assets in convertible debentures of utilities and telecom companies.
EVUAX carries an expense ratio of 1.14% compared with the category average of 1.25%. Moreover, EVUAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 3.3%.
EVUAX has a Zacks Mutual Fund Rank #2. Further, Timothy P. O'Brien is the fund manager of EVUAX since 2002.
Fidelity Select Utilities Growth (FSUTX - Free Report) normally invests a large chunk of its assets in common stocks of companies mainly involved in the utilities sector and companies that generate the majority of their revenue from multiple utilities operations. It seeks growth of capital by investing in both U.S. and non-U.S. companies.
FSUTX carries an expense ratio of 0.77% compared with the category average of 1.25%. Moreover, FSUTX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 9.4%.
FSUTX has a Zacks Mutual Fund Rank #1. Further, Douglas Simmons is the fund manager of FSUTX since 2006.
MFS Utilities R6 (MMUKX - Free Report) invests a majority of its assets in securities of companies involved in the utilities sector. The fund invests in those companies that are involved in the production, manufacture, transmission, generation, distribution or sale of electric, water, gas and other types of energy.
MMUKX carries an expense ratio of 0.66% compared with the category average of 1.25%. Moreover, MMUKX requires a minimal initial investment of $0. The fund has one-year annualized returns of 4.3%.
MMUKX has a Zacks Mutual Fund Rank #2. Further, Maura A. Shaughnessy is one of the fund managers of MMUKX since 1992.
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Industrial Production Up For Third Straight Month: 4 Funds
Industrial production increased considerably in August, following an increase in production of motor vehicles and parts. Additionally, output related to utilities and mining also rose, which also supported the surge in manufacturing output.
Given these positive trends, the addition of mutual funds that have significant exposure to the industrials and utilities sector could be a prudent decision. Now, we will take a glance at the encouraging data that raised hopes for these sectors for the coming months.
Industrial Production Rebounds
Industrial production in August moved higher and July’s figure was also revised upward to 0.4%. The Board of Governors of the Federal Reserve System reported that industrial production increased 0.4% in August, exceeding the consensus expectation of a 0.3% increase. Output jumped 4.9% in the last 12 months, closing near the highest annual growth last seen in 2010.
Also, capacity utilization advanced from 77.9% to 78.1% last month. Although capacity utilization remained below its long-run (1972–2016) average by 1.7%, it posted growth of 1.7% in the last one year. Moreover, with recent economic data like ISM Manufacturing Index and new orders remaining upbeat, it is expected that economy will be able to expand output gradually.
Auto Output Touch Best Level Since April
Manufacturing output advanced, mainly on the back of a 4% increase in production of motor vehicles and parts. Motor vehicle assemblies climbed to 11.5 million units annually, its highest figure since April. Additionally, the utilities production rose 1.2%, while mining output advanced 0.7%. Increase in electricity usage in August boosted utilities production, while a sharp rise in oil and natural gas production benefited mining production.
Separately, the manufacturing index increased from 58.1% in July to 61.3% in August, scaling a two-month high, according to the Institute of Supply Management (ISM). The improvement was largely driven by strength in new orders, which jumped from 60.2% in July to 65.1% in August.
Also, Production, Supplier Deliveries and Inventories Indexes climbed 4.8 percentage points, 2.4 percentage points and 2.1 percentage points month over month to 63.3%, 64.5% and 55.4%, respectively. (Read More: 3 Fidelity Funds to Ride Best Manufacturing Boom Since 2004)
Buy These 4 Mutual Funds
As discussed above, recent data related to the industrials sector clearly indicate growth. This is borne out by the fact that the Industrial Select Sector SPDR (XLI) and Utilities Select Sector SPDR (XLU) respectively gained 3.7% and 8.1% in the past six months. Additionally, mutual funds related to this sector registered strong returns. According to Morningstar, the industrials and utilities mutual fund posted year-to-date returns of 5.7% and 5.9%, respectively.
Against this encouraging backdrop, we have selected four industrial mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have impressive one-year annualized. These also have minimum initial investment within $5000 and 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 Industrials (FCYIX - Free Report) seeks capital growth by investing mainly in equity securities. FCYIX invests a huge portion of its assets in securities of companies involved in manufacture, development, sale and distribution of industrial products and equipment. The fund invests in both U.S. and non-U.S. companies.
FCYIX carries an expense ratio of 0.77% compared with the category average of 1.22%. Moreover, FCYIX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 16.5%.
The fund carries a Zacks Mutual Fund Rank #1. Tobias W. Welo is the fund manager of FCYIX since 2007. Further, as of the last filing, United Technologies is the top holding for FCYIX.
Wells Fargo Utility and Telecommunications A (EVUAX - Free Report) invests heavily in common and preferred stocks and investment-grade debt securities of utilities and telecom service providers. EVUAX also invests around 35% of its assets in convertible debentures of utilities and telecom companies.
EVUAX carries an expense ratio of 1.14% compared with the category average of 1.25%. Moreover, EVUAX requires a minimal initial investment of $1,000. The fund has one-year annualized returns of 3.3%.
EVUAX has a Zacks Mutual Fund Rank #2. Further, Timothy P. O'Brien is the fund manager of EVUAX since 2002.
Fidelity Select Utilities Growth (FSUTX - Free Report) normally invests a large chunk of its assets in common stocks of companies mainly involved in the utilities sector and companies that generate the majority of their revenue from multiple utilities operations. It seeks growth of capital by investing in both U.S. and non-U.S. companies.
FSUTX carries an expense ratio of 0.77% compared with the category average of 1.25%. Moreover, FSUTX requires a minimal initial investment of $2,500. The fund has one-year annualized returns of 9.4%.
FSUTX has a Zacks Mutual Fund Rank #1. Further, Douglas Simmons is the fund manager of FSUTX since 2006.
MFS Utilities R6 (MMUKX - Free Report) invests a majority of its assets in securities of companies involved in the utilities sector. The fund invests in those companies that are involved in the production, manufacture, transmission, generation, distribution or sale of electric, water, gas and other types of energy.
MMUKX carries an expense ratio of 0.66% compared with the category average of 1.25%. Moreover, MMUKX requires a minimal initial investment of $0. The fund has one-year annualized returns of 4.3%.
MMUKX has a Zacks Mutual Fund Rank #2. Further, Maura A. Shaughnessy is one of the fund managers of MMUKX since 1992.
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 >>