3 Must-Buy Funds on Solid Growth in Retail Sales

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The retail sector is not only bouncing back to normal but is on solid ground as rising prices haven’t yet discouraged shoppers from spending more on consumer goods. This has seen retail sales growing steadily over the past few months.

So far, 2022 has been great for the retail sector, with sales surging in all the months despite growing concerns about escalating prices. Thus, funds like Fidelity Select Consumer Staples Portfolio FDFAX, Fidelity Select Retailing Portfolio FSRPX and Fidelity Select Consumer Staples Portfolio FDIGX are likely to benefit in the near term.

Retail Sector on Solid Ground

According to the latest Mastercard SpendingPulse, retail sales jumped a solid 7.2% in April on a year-over-year basis. The good sign is that sales have now exceeded the pre-pandemic levels after taking a beating over the past couple of years. April retail sales came in 15.3% higher than pre-pandemic spending in 2019.

In April, in-store sales jumped 10% year over year, while online retail sales fell 1.8%. The drop in online sales can primarily be attributed to increased footfall in physical locations. In-store traffic has been getting a boost as the economy continues to reopen and more individuals are getting vaccinated.

People were more reliant on e-commerce till last year because they felt safer shopping online. During the peak of the epidemic and for several months afterward, e-commerce played a significant role in helping the retail sector survive the pandemic. However, things are once again getting back to normal.

According to the report, retail sales increased across all sections. Apparel sales increased 10.8% year over year and 8.4% from April 2019. Also, department store sales increased 15.7% on a year-over-year basis and 23.3% from the pre-pandemic era.

April’s jump comes despite growing concerns over rising prices. Both retailers and customers are concerned about inflation, which has reached a 40-year high, but people are still willing to spend.

The Fed has raised interest rates twice this year to keep inflation under control and more rate hikes are expected in the coming months. However, growing income from higher wages has allowed consumers to spend freely up until now.

Retail sales in the United States are expected to rise by 6% to 8% in 2022, according to the National Retail Federation, which is greater than the pre-pandemic growth rate of 3.7%. This year’s total retail sales, excluding vehicle, restaurant, and gasoline sales, are predicted between $4.86 trillion and $4.95 trillion.

3 Best Choices

We have selected three mutual funds with significant exposure to the retail sector that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and are poised to gain from the above factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

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 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 Consumer Staples Portfolio fund aims for capital growth. FDFAX invests the majority of assets in securities of companies primarily engaged in manufacturing, marketing or distribution of consumer staples products. Fidelity Select Consumer Staples Portfolio fund invests in both U.S. and non-U.S. issuers.

Fidelity Select Consumer Staples Portfolio has a history of positive total returns for more than 10 years. Specifically, FDFAX has returned 11.9% and 7.2% 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.

FDFAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0% versus the category average of 0.76%.

Fidelity Select Retailing Portfolio fund aims for capital appreciation. FSRPX invests a large portion of its assets in the common stock of companies engaged in merchandising finished goods and services, primarily to individual consumers.

Fidelity Select Retailing Portfolio has a history of positive total returns for more than 10 years. Specifically, FSRPX has returned nearly 17.3% and nearly 17.9% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.73%, which is below the category average of 0.79%.

Fidelity Select Consumer Staples Portfolio fund aims at capital appreciation. FDIGX invests its assets in the common stock of companies engaged in the manufacture, sale, or distribution of consumer staples.

Fidelity Select Consumer Staples Portfolio fund has a history of positive total returns for more than 10 years. Specifically, FDIGX has returned nearly 11.7% and nearly 7.5% over the past three and five-year periods, respectively. To see how this fund performed compared in its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FDIGX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0%, which is below the category average of 0.76%.

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