The U.S. Commerce Department reported that orders for durable goods increased highly in November, keeping the rebound in the manufacturing space strong from the pandemic-led slump. Earlier this month, the Institute for Supply Management (ISM) reported that its manufacturing PMI also inched up. Both the data are signaling growth in this sector with a significant surge in demand.
The reopening efforts have been steady so far despite a spike in COVID-19 cases due to the emerging variants. The continual recovery of the U.S. economy generated business for the manufacturers and a strong consumer confidence created demand for big-budget goods. The manufacturing space is poised to grow, so is the demand scenario for electrical equipment, computers, cars, etc.
Here are four mutual funds that investors can look into: Fidelity Select Defense & Aerospace Portfolio FSDAX, Fidelity Select Chemicals Portfolio FSCHX, Fidelity Select Automotive Portfolio FSAVX and Fidelity Select Industrials Portfolio FCYIX.
On Dec 24, the Census Bureau reported that new orders for the manufactured durable goods increased $6.5 billion or 2.5% to $268.3 billion in November, much higher than the consensus estimate of a 1.7% increase. The figure for October was also revised 0.1% upward. Excluding transportation, new orders increased 0.8% while excluding defense, new orders increased 2%. A steep rise of 6.5% in civilian aircraft orders, broadly categorized under transportation equipment, pushed new orders in November.
The sub-index like shipments of manufactured durable goods grew 0.7% to $263.6 billion and inventories increased $2.9 billion or 0.6%. The parameter that measures core capital goods orders, excluding volatile sectors like transportation and defense, declined 0.1% last month. While the dip in core orders signals slowing down of business investments, it is the first decline since February, and stands 21% above the pre-COVID levels.
However, for the upcoming year, it is too early to comment on omicron’s impact on business and what role delmicron will play with respect to business and consumer sentiments. Hence, strong demand and supply-chain bottlenecks will push businesses to ramp up investment in 2022, leading to a stronger durable goods demand.
4 Fund Picks
With durable goods orders holding momentum, we shortlisted four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from such positive economic data. Moreover, these funds have encouraging five-year returns and the minimum initial investment is within $5000.
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 fund-rating systems, the Zacks Mutual Fund Rank is not just focused on the 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 portfolio diversification without several commission charges 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 Defense & Aerospace Portfolio fund invests a huge portion of its assets in the securities of companies involved primarily in the research, manufacturing, and sale of products and services, per the defense or aerospace industries. FSDAX seeks capital growth by investing in both U.S. and non-U.S. companies.
This Sector - Other product 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.
Fidelity Select Defense & Aerospace Portfolio has a Zacks Mutual Fund Rank #1 and has returned 3.3% and 8.7% over the past three and five-year benchmarks, respectively.
Fidelity Select Chemicals Portfolio fund aims for capital appreciation. The non-diversified fund normally invests most assets in common stocks of companies, principally engaged in the research, development, manufacturing or marketing of products or services related to the chemical process industries.
This Sector - Other product 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.
Fidelity Select Chemicals Portfolio has a Zacks Mutual Fund Rank #1 and has returned 12.7% and 9.8% over the past three and five years, respectively.
Fidelity Select Industrials Portfolio fund aims for capital appreciation. This non-diversified fund normally invests a large portion of its assets in the common stock of companies, principally engaged in the research, development, manufacturing, distribution, supply or sale of industrial materials, equipment, products or services.
This Sector - Other product has a history of positive total returns for above 10 years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.
Fidelity Select Industrials Portfolio has a Zacks Mutual Fund Rank #2 and has returned 12.5% and 10.3% over the past three and five years, respectively.
Fidelity Select Automotive Portfolio fund aims for capital appreciation. This fund invests the majority of assets in common stocks of companies engaged in manufacturing automobiles, trucks, specialty vehicles, parts, tires and related services.
This Sector - Other product 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.
Fidelity Select Automotive Portfolio has a Zacks Mutual Fund Rank #2 and has returned 34.7% and 24.3% over the past three and five years, respectively.
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