3 Mutual Funds to Ride the Surge in Industrial Production

Per the latest report by the Federal Reserve on Sep 17, industrial production rose to its highest level in a year’s time. The increase was supported mainly by a surge in mining and utilities output.

Under such circumstances, investing in mutual funds having significant exposure to the manufacturing and industrial companies seems prudent.

U.S. Industrial Production Hits a 1-Year High

Industrial production in the United States increased 0.6% for the month of August, marking its rebound from the lows it had hit in July. The consensus estimate for the period was an increase of a meager 0.2%. Notably, any reading above 50 indicates overall growth of the manufacturing sector. Steady industrial production indicates that the U.S. economy is in fine fettle.

Factors Supporting the Growth

Higher mining output, which includes oil and gas production, provided a boost to the manufacturing sector. The metric increased 1.4% in August, rebounding from a decline of 1.5% a month earlier. Further, manufacturing output also surged 0.5% in the month.

Meanwhile, capacity utilization surged to 77.9% in August to its highest settlement since March. Notably, the operating rates for durable as well as nondurable manufacturing increased 0.3 percentage point in August. Furthermore, the utilization rate for mining surged to 90.5%.

3 Best Funds to Buy Now

Given such positives, we have highlighted three mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such 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 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 Defense & Aerospace Portfolio FSDAX fund invests a huge portion of its assets in securities of companies involved primarily in the research, manufacture and sale of products and services as per the defense or aerospace industries. The fund 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 over 10 years. Specifically, the fund has returned 21.4% over the three-year and 16% over the five-year benchmarks. 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 an annual expense ratio of 0.75%, which is below the category average of 1.01%.

Fidelity Select Chemicals Portfolio FSCHX fund seeks capital appreciation. The fund normally invests at least 80% of its 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. Specifically, the fund has returned 2.6% over the three-year and 1.8% over the five-year benchmarks. 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 #2 and an annual expense ratio of 0.77%, which is below the category average of 1.37%.

Fidelity Select Industrials Portfolio FCYIX fund seeks capital appreciation. FCYIX 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 materials, equipment, products, or services related to cyclical industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 9.5% over the three-year and 7.7% over the five-year benchmarks. 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 an annual expense ratio of 0.76%, which is below the category average of 1.01%.

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