Back to top

Image: Bigstock

3 Mutual Funds With Hugh Potential for Growth Ahead

Read MoreHide Full Article

U.S. financial markets are inching up slowly, marking a revival in the country’s economy. As stay-at-home orders have been lifted, states are trying their best to open public places in a bid to raise economic activity. As more consumers return to their pre-pandemic spending habits and venture out to their favourite restaurants, dine-outs and retail stores, and make travel plans, economic revival could speed up.

This is why investing in mutual funds focused on industries poised for growth post lockdown makes sense.

Indexes Up on Optimism Over Economic Recovery

The country’s three major indexes, the Dow Jones Industrial Average, the S&P 500 and the Nasdaq Composite, have gained significantly — 32.9%, 32.6% and 37.9%  respectively — since their Mar 23 lows.

Various factors have helped this impressive growth in over a little more than two months. Two rate cuts by the Federal Reserve in March along with its monetary stimulus of about $2.3 trillion definitely helped industries. The Congress’ coronavirus relief package of about $3 trillion to aid states, local governments and U.S. taxpayers aided the indexes too.

In fact, as of Jun 1, the Dow Jones remains well above 25,000 points; after closing Monday’s trading session at 25,475.02. In addition, the S&P 500 crossed its 3,000 benchmark last week and currently remains above the number.

With businesses, offices, restaurants, hotels and other public places reopening across the United States, consumer activity is moving north again. This is why businesses such as airlines, hotels, restaurants, retailers of apparel, shoes and other discretionary products that took a blow during the lockdown are expected to gain pace in the near future.

According to online reservation platform Open Table, restaurant bookings declined about 100% in the last weeks of March and most of April as compared to the year-ago period (per a CNBC report). But after states allowed restaurants to reopen dining, bookings started picking up toward the end of last month, indicating a revival for the food service industry.

Finally, the hotel and travel industries are pacing up too, as occupancy rate for U.S. hotels is climbing higher. Occupancy rates in April and May began to increase as people went back to execute their travel plans. Per the global hospitality research company STR, demand in occupancy has improved slightly since mid-April.

3 Funds to Buy

We have, therefore, selected three mutual funds from sectors such as retail, leisure and consumer discretionary industries. All of these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). In addition, the minimum initial investment for these funds is within $5,000.

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) fund aims for capital growth. The fund invests the majority of its assets in securities of companies that are engaged in the production and distribution of goods or services in the leisure industries. FDLSX is a non-diversified fund that invests mostly in common stocks of companies. The fund invests in securities of both U.S. and non-U.S. issuers alike.

This Zacks Sector – Other has a history of positive total returns for more than 10 years. 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 0.76%, which is below the category average of 1.27%. It has returned 3.3% over the past three years. The fund has no minimum initial investment. FDLSX carries a Zacks Mutual Fund Rank #1.

Fidelity Select Retailing Portfolio (FSRPX - Free Report) fund aims for capital appreciation. It invests the majority of its assets in securities of companies engaged in producing finished goods and services for individual consumers. The non-diversified fund invests in common stocks of companies and in securities of both U.S. and non-U.S. issuers.

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

FSRPX has an annual expense ratio of 0.74%, which is below the category average of 1.27%. It has returned 14.2% over the past three years. The fund has no minimum initial investment. FSRPX carries a Zacks Mutual Fund Rank #2.

Fidelity Select Consumer Discretionary Portfolio (FSCPX - Free Report) fund aims for capital growth. It invests the majority of its assets in securities of companies that manufacture and market consumer discretionary products and services. The non-diversified fund mostly invests in common stocks of companies.

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

FSCPX has an annual expense ratio of 0.76%, which is below the category average of 1.27%. It has returned 9.5% over the past three years. The fund has no minimum initial investment. FSCPX carries a Zacks Mutual Fund Rank #2.

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 >>


In-Depth Zacks Research for the Tickers Above


Normally $25 each - click below to receive one report FREE:


Fidelity Select Retailing (FSRPX) - free report >>

Fidelity Select Leisure (FDLSX) - free report >>

Fidelity Select Consumer Discretion (FSCPX) - free report >>