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3 Mutual Funds to Buy on Impressive Tech Earnings

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The tech-laden Nasdaq boosted Wall Street during the Feb 4 trading session, backed by high-profile corporate earnings and investor optimism over U.S.-China trade talks.

The S&P 500 index and Nasdaq Composite index gained 0.7% and 1.2%, respectively, while the Dow Jones Industrial Average gained 0.7% on Feb 4. The tech sector’s jump was reflected in Nasdaq’s outperformance over the other major Wall Street indexes. The Technology Select Sector SPDR fund (XLK) edged up 1.6% as well.

Shares of technology giants such as Apple, Facebook, Netflix and Alphabet climbed at least 2%. According to Bespoke Investment Group, on average, companies that have reported their earnings so far have gained 1.12% on average. If this performance continues for the rest of the earnings season, it could be the best in nine years in terms of stock performance, a CNBC report cited.

Given the tech stocks uptick prompted by impressive earnings, it would be prudent to add to your portfolio some mutual funds that invest in the sector.  

Strong Tech Earnings Driving Equity Markets

A reason for markets to react so positively to earnings could be the fact that investors weren’t hopeful of good earnings and thus had low expectations. With global economic slowdown and the effect of tax-cut boost diminishing, investors were anticipating disappointing earnings.  

Apple reported first-quarter 2019 earnings per share of $4.18 against the $4.17 consensus. Facebook reported fourth-quarter 2018 earnings per share of $2.38, which beat the $2.19 consensus. Netflix reported fourth-quarter 2018 earnings per share of 30 cents, which beat the consensus of 24 cents. Alphabet reported fourth-quarter 2018 earnings per share of $12.77, which came in above the consensus of $10.82.

The better-than-expected earnings definitely helped boost equities. This trend is likely to continue given the dovish stance taken by Federal Reserve, after it informed it had kept further rate hikes on hold.

3Mutual Funds to Buy

We have selected three mutual funds that have invested in technology companies heavily. These funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5,000.

We expect these funds to outperform 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 Software & IT Svcs Port (FSCSX - Free Report) seeks to gain capital by mainly investing in common stocks. The fund invests up to 80% of its net assets in securities of companies that are engaged in the design, production or distribution of products and services related to information-based or software services. The top three companies in which the fund has invested are Microsoft Corp, Alphabet Inc and Facebook Inc.

This Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCSXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 1.32%. The fund has three and five-year returns of 16.77% and 13.74%, respectively.

T. Rowe Price Comm & Tech Investor (PRMTX - Free Report) seeks capital appreciation by investing the majority of its net assets in equity securities of companies engaged in technology and communication. The fund invests in U.S. and non-U.S. companies alike. The top three companies in which the fund has invested are Amazon.com, American Tower Corp and Facebook Inc.

This Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRMTXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%, which is below the category average of 1.38%. The fund has three and five-year returns of 11.96% and 10.36%, respectively.

Red Oak Technology Select (ROGSX - Free Report) aims capital growth by investing the majority of its assets in companies that are engaged in the technology sector. It invests mostly in U.S. companies, and a little in foreign organizations as well. The top three companies where the fund has invested are Microsoft Corp, Alphabet Inc and Intel Corp.

This Sector – Tech product has a history of positive total returns for more than 10 years. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

ROGSXhas a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.94%, which is below the category average of 1.32%. The fund has three and five-year returns of 18.40% and 13.91%, respectively.

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