4 Funds to Buy as Congress Passes Infrastructure Bill

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Late Nov 5, the House of Representatives passed the $1.2-trillion infrastructure bill in a majority voting of 228-206. The 2,702-page legislation has been in talks for a while now, setting markets up for a roller-coaster ride over the past few months. Though the bill is far less controversial than President Biden’s $2-trillion social-spending plan, it will surely pay off for some companies over several years. It is now headed to President Biden for his signature.

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Now, let’s delve into the nitty-gritty of the infrastructure bill or the so-called Infrastructure Investment and Jobs Act. It will put $550 billion in new money into transportation projects, the utility grid and broadband. The bill plans on increasing highway funding by 50% over the next five years and includes $100 billion for roads, bridges and other major projects. Additionally, $66 billion has been assigned for passenger and freight rail, $39 billion for public transit, and $15 billion for electric vehicles and buses.

In an attempt to enhance communication and lay the foundations for 5G boom, the bill assigns $65 billion to broadband. The bill also puts $55 billion into water systems to replace lead pipes along with $55 billion in clean water projects. It also allocates $21 billion toward environmental clean-up and $73 billion to Power infrastructure.

The $1.2-trillion resolution will surely boost the U.S. economy, specifically the utilities, infrastructure and communications sectors. Companies engaging in highway construction, especially raw materials, heavy equipment, engineering, and construction, alternative energy, electric vehicles (EVs), EV components, 5G deployment, and conservation and purification of water for homes, businesses and industries are poised to gain.

Additionally, the bill will “create millions of jobs, turn the climate crisis into an opportunity, and put us on a path to win the economic competition for the 21st Century,” according to President Biden’s comment.

4 Funds to Buy

The infrastructure bill is poised to benefit the utilities, infrastructure and communications sectors. Hence, we have shortlisted four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) and are poised to grow. These funds also have encouraging year-to-date (YTD) returns. Additionally, the minimum initial investment is within $5000. We expect these funds to outperform peers in the future.

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 Utilities Portfolio FSUTX aims for capital appreciation. This non-diversified fund invests most assets in common stocks of companies primarily engaged in the utilities industry and generating most of their revenues from utility operations.

This Zacks Sector – Utilities has a history of positive total returns for more than 10 years. Specifically, FSUTX has returned 9.9% and 11.4% in the past three and five-year period, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSUTX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, below the category average of 0.94%. 

Fidelity Select Materials Portfolio FSDPX aims for capital appreciation. This non-diversified fund invests most assets in common stocks of companies principally engaged in the manufacture, mining, processing, or distribution of raw materials and intermediate goods.

This Sector – Energy product has a history of positive total returns for over 10 years. Specifically, FSDPX has three and five-year returns of 17% 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.

FSDPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.80%, below the category average of 1.11%.

Fidelity Select Communication Services Portfolio FBMPX aims for capital appreciation. The fund invests the majority of its assets in companies engaged in the development, production, or distribution of communication services.

This Zacks Sector – Tech product has a history of positive total returns for more than 10 years. FBMPX is a non-diversified fund and has returned 26.3% and 20.5% in the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FBMPX has an annual expense ratio of 0.77%, below the category average of 0.89%.

Fidelity Real Estate Investment Portfolio FRESX fund aims for above-average income and long-term capital growth, consistent with reasonable investment risk. This non-diversified fund invests primarily in common stocks. The majority of FRESX’s assets are invested in securities of companies principally engaged in the real estate industry and other real estate-related investments.

This Zacks sector – Real Estate product has a history of positive total returns for more than 10 years. Specifically, FRESX has returned 13.1% and 9.2% over the past three and five years, respectively. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FRESX has an annual expense ratio of 0.74% versus the category average of 1.08%.

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