4 Funds to Buy as Durable Goods Orders Pick Up in August

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The U.S. manufacturing space is gradually rebounding from its pandemic-led slump. Earlier in September, Institute for Supply Management (ISM) reported that its manufacturing PMI rose to 59.9% in August, a consecutive monthly rise. Adding to this positivity, on Sep 27, the Census Bureau reported that durable goods orders rose 1.8% for August, surpassing the consensus estimate of 0.7%. August’s jump in orders makes it the sixth consecutive monthly gain as July’s figures were upwardly revised to a 0.5% rise (preliminary report was 0.1% decline).

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New orders have risen significantly in past months and the growth streak points toward a surge in demand, well above the pre-pandemic levels. This upbeat report was attributed by a significant jump in orders for Boeing 737 Max jets and other planes. The increase in traveling has perked up demand in commercial aerospace and orders for new commercial airplanes jumped 78% in August. New transportation orders totaled nearly $81 billion last month, up from $77 billion in July. Non-defense aircraft new orders jumped to $16 billion in August from $9 billion in the month before.

Meanwhile, excluding transportation, new orders rose only 0.2%. Although new orders outside transportation were softer, it is majorly due to a shortage in labor and supplies. Supply-side constraints, especially chip shortage, have dampened the automobile space. However, this is temporary and manufacturers expect to recruit fresh labor and mitigate the supply-chain issues soon.

Given the fact that reopening efforts have helped in the steady recovery of the U.S. economy and generated business for manufacturers and the upcoming holiday season will perk up demand for big-budget good, the manufacturing space is poised to grow. Hence, demand for electrical equipment, computers, cars will continue to rise.

4 Top Fund Picks

With the continued growth in durable goods orders, we have 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 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 FSDAX fund invests a huge portion of its assets in the securities of companies involved primarily in the research, manufacture, and sale of products and services, per the defense or aerospace industries. It 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.

FSDAX has a Zacks Mutual Fund Rank #1 and has returned 4% and 12.6% over the past three and five-year benchmarks, respectively.

Fidelity Select Automotive Portfolio FSAVX 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 over 10 years. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSAVX has a Zacks Mutual Fund Rank #1 and has returned 27.7% and 20.6% over the past three and five years, respectively.

Fidelity Select Chemicals Portfolio FSCHX fund aims for capital appreciation. The non-diversified fund normally invests most assets in common stocks of companies principally engaged in the research, development, manufacture, or marketing of products or services related to the chemical process industries.

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

FSCHX has a Zacks Mutual Fund Rank #1 and has returned 5.9% and 10.5% over the past three and five years, respectively.

Fidelity Select Industrials Portfolio FCYIX 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, manufacture, distribution, supply, or sale of industrial materials, equipment, products, or services.

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

FCYIX has a Zacks Mutual Fund Rank #2 and has returned 9.5% and 11.6% over the past three and five years, respectively.

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