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Orders for U.S.-made goods meant to last longer than three years rose sharply in October, indicating that demand remains high despite the pressure on the cost of living created by rising costs. The jump in orders comes since data showed that the cost of living somewhat eased in October as inflation showed signs of colling.

Higher demand for durable goods also indicates that the manufacturing sector despite being under tremendous pressure is still going strong and has succumbed to inflationary pressures. Thus, funds like Fidelity Select Automotive Portfolio (FSAVX - Free Report), Fidelity Select Industrials Portfolio (FCYIX - Free Report), and Fidelity Select Transportation Portfolio(FSRFX - Free Report) are likely to benefit in the near term.

Durable Goods Orders Rise

The Commerce Department reported on Nov 23 that orders for durable goods made in U.S. factories rose a solid 1% or $2.8 billion in October on a month-over-month basis to reach $277.4 billion. This was more than economists’ expectations of a rise of 0.4%. October’s jump follows a 0.3% rise in orders for durable goods in September.

Excluding defense, new orders for durable goods increased 0.8% in October.

The rise in October was primarily driven by an increase in orders for transportation equipment. Orders for transportation equipment rose $2 billion, or 2.1%, to reach $97.8 billion. Orders for transportation equipment have not increased in six of the past seven months. Excluding transportation, new orders increased 0.5% in October.

Shipments of manufactured durable goods increased 0.4% in October after gaining 0.3% in September. Shipments of machinery led the gains, at 1.3%. Capital goods shipments have now increased in 17 out of the past 18 months. Core capital goods shipments, a metric to gauge equipment investment in the government’s GDP report, rose 1.3%.

Additionally, inventories of manufactured durable goods increased by $0.9 billion, or 0.2%, month over month in October, reaching $489.5 billion.

The solid rise in October orders gain proves that producers are still confident, although rising costs are reducing consumer confidence.

People spent more on goods and less on services during the peak of the pandemic. However, once restrictions started getting eased, and the economy began performing at its optimum level, people started spending more on services.

Even then, there is still a sizable amount of product demand, which is driving up orders for durable goods.

3 Best Choices

We have, thus, selected three mutual funds with significant exposure to the manufacturing sector, each 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.

The question here is why should investors consider mutual funds? Reduced transaction costs and diversification of portfolios without the several commission charges that are associated with stock purchases are the primary reasons why one should be parking their money in mutual funds.

Fidelity Select Automotive Portfolio aims for capital appreciation. FSAVX invests most of its assets in common stocks of companies engaged in manufacturing automobiles, trucks, specialty vehicles, parts, tires, and related services.

Fidelity Select Automotive Portfolio fund has a history of positive total returns for over 10 years.

Fidelity Select Automotive Portfolio has a Zacks Mutual Fund Rank #1. FSAVX has returned 14.5% and 9.9% over the past three and five years, respectively.

Fidelity Select Industrials Portfolio fund aims for capital appreciation. FCYIX invests typically 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. Fidelity Select Industrials Portfolio is a non-diversified fund.

Fidelity Select Industrials Portfolio fund has a history of positive total returns for over 10 years.

Fidelity Select Industrials Portfolio has a Zacks Mutual Fund Rank #1. FCYIX has returned 6.2% and 5.5% over the past three and five years, respectively.

Fidelity Select Transportation Portfolio aims for capital appreciation. FSRFX invests the majority of its assets in securities of companies that are primarily involved in the design, manufacture, distribution, or sale of transportation equipment or businesses that are primarily involved in providing transportation services.

Fidelity Select Transportation Portfolio fund has a history of positive total returns for over 10 years.

Fidelity Select Transportation Portfolio has a Zacks Mutual Fund Rank #2. FSRFX has returned 10.1% and 8% over the past three and five years, respectively.

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