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3 Funds to Benefit From a Burgeoning US Service Sector
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Per the latest report from the Institute of Supply Management (ISM), service activity for the month of October surged for the 105th month on the trot. Steady growth in 17 out of the 18 key non-manufacturing industries boosted service sector activity in October.
Steadiness in the metric, which tracks the performance of service-focused companies in America, points toward a strengthening economy. Hospitals and healthcare service providers, banks as well as hotels exhibited growth last month. Under such circumstances, investing in mutual funds having significant exposure to services-related companies may prove to be prudent.
Service Activity Remains Robust
The ISM reported on Nov 5 that non-manufacturing activity for August came in at 60.3%, surpassing the consensus estimate of 58.8%. Although the October reading trailed the September reading of 61.6% (an all-time high), it achieved the second-highest level of the index’s 21-year old history. A reading above 50 indicates expansion in the sector. And a reading above 55% is considered phenomenal.
Difficulty in finding transportation to ship goods proved to be a major hindrance to overall growth. However, a flourishing domestic economy and robust demand more than made up for such adversities.
Sub-Indexes Improve
Non-manufacturing inventories index increased 56% in October. This marked the ninth consecutive month of increase. Moreover, the Business Activity Index registered growth of 62.5% in October for the 111th consecutive month. Notably, of the 15 industries surveyed, 14 reported an increase in business activity for the month.
Looking at the other positive developments from the report, the non-manufacturing New Orders Index surged to 61.5%. This represents advancement for 93 straight months albeit at a slightly slower rate when compared with September. Finally, the non-manufacturing Employment Index surged to 59.7%, expanding for the 56th straight month.
3 Best Choices
We have, thus, selected three service related mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-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 Leisure Portfolio (FDLSX - Free Report) invests a bulk of its assets in securities of companies engaged in the design, production or distribution of goods or services in the leisure and recreation industries. The fund seeks growth of capital and invests both in U.S. and non-U.S. companies.
This Sector – Other product has a track of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 12.6% and 12%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FDLSX has an annual expense ratio of 0.77%, which is below the category average of 1.33%.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests a large chunk 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. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
This Sector – Health product has a track of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 18.2% and 18.6%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSHCX has an annual expense ratio of 0.76%, which is below the category average of 1.28%.
T. Rowe Price Financial Services (PRISX - Free Report) seeks both capital growth and current income. The majority of its assets are invested in financial services sector companies. It may also purchase securities of companies involved in providing financial software. The fund uses fundamental bottom-up analysis to select securities.
This Sector – Finance product has a history of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 13.5% and 11.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PRISX has an annual expense ratio of 0.85%, which is below the category average of 1.43%.
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3 Funds to Benefit From a Burgeoning US Service Sector
Per the latest report from the Institute of Supply Management (ISM), service activity for the month of October surged for the 105th month on the trot. Steady growth in 17 out of the 18 key non-manufacturing industries boosted service sector activity in October.
Steadiness in the metric, which tracks the performance of service-focused companies in America, points toward a strengthening economy. Hospitals and healthcare service providers, banks as well as hotels exhibited growth last month. Under such circumstances, investing in mutual funds having significant exposure to services-related companies may prove to be prudent.
Service Activity Remains Robust
The ISM reported on Nov 5 that non-manufacturing activity for August came in at 60.3%, surpassing the consensus estimate of 58.8%. Although the October reading trailed the September reading of 61.6% (an all-time high), it achieved the second-highest level of the index’s 21-year old history. A reading above 50 indicates expansion in the sector. And a reading above 55% is considered phenomenal.
Difficulty in finding transportation to ship goods proved to be a major hindrance to overall growth. However, a flourishing domestic economy and robust demand more than made up for such adversities.
Sub-Indexes Improve
Non-manufacturing inventories index increased 56% in October. This marked the ninth consecutive month of increase. Moreover, the Business Activity Index registered growth of 62.5% in October for the 111th consecutive month. Notably, of the 15 industries surveyed, 14 reported an increase in business activity for the month.
Looking at the other positive developments from the report, the non-manufacturing New Orders Index surged to 61.5%. This represents advancement for 93 straight months albeit at a slightly slower rate when compared with September. Finally, the non-manufacturing Employment Index surged to 59.7%, expanding for the 56th straight month.
3 Best Choices
We have, thus, selected three service related mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-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 Leisure Portfolio (FDLSX - Free Report) invests a bulk of its assets in securities of companies engaged in the design, production or distribution of goods or services in the leisure and recreation industries. The fund seeks growth of capital and invests both in U.S. and non-U.S. companies.
This Sector – Other product has a track of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 12.6% and 12%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FDLSX has an annual expense ratio of 0.77%, which is below the category average of 1.33%.
Fidelity Select Health Care Services Portfolio (FSHCX - Free Report) invests a large chunk 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. FSHCX seeks appreciation of capital. The fund invests in securities of both U.S. and non-U.S. companies.
This Sector – Health product has a track of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 18.2% and 18.6%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
FSHCX has an annual expense ratio of 0.76%, which is below the category average of 1.28%.
T. Rowe Price Financial Services (PRISX - Free Report) seeks both capital growth and current income. The majority of its assets are invested in financial services sector companies. It may also purchase securities of companies involved in providing financial software. The fund uses fundamental bottom-up analysis to select securities.
This Sector – Finance product has a history of positive total returns for more than 10 years. Specifically, the fund's returns over the three and five-year benchmarks are 13.5% and 11.7%, respectively. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
PRISX has an annual expense ratio of 0.85%, which is below the category average of 1.43%.
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 >>