3 Funds to Buy as Semiconductor Sales Continue to Rebound
The worst appears to be over for the semiconductor market, as sales have been making a solid rebound over the past six months. Higher demand for microchips across industries is once again giving sales a boost, and predictions are that sales will grow further in the near term as price pressures ease with a steady decline in inflation.
Given this situation, funds like Fidelity Select Semiconductors Portfolio FSELX, Janus Henderson Global Technology and Innovation Fund JNGTX and DWS Science and Technology A KTCAX are likely to benefit in the near term.
Semiconductor Sales Rise Again
The Semiconductor Industry Association (SIA) reported on Oct 4 that microchip sales totaled $44 billion in August, rising 1.9% month over month compared to July’s total of $43.2 billion. Although sales were down 6.8% year over year in August, the market is making a solid rebound after a difficult second half of 2022.
In August, semiconductor sales grew 4.6% in the Americas, 1.2% in Asia Pacific and 2% in China. This is the sixth consecutive month of increase in sales after an initial weakness witnessed at the beginning of the year.
Semiconductor sales totaled $124.5 billion in the second quarter of 2023, 4.7% higher than the first quarter.
Although 2022 appeared to be impressive for the semiconductor market as a whole, sales started plunging in the second quarter as several geopolitical factors and the Federal Reserve’s monetary tightening campaign to curb inflation weighed on the sector.
However, industry experts had earlier forecast that global semiconductor sales would hit a low by the end of the first quarter before making a solid rebound that would extend throughout 2023.
Demand for semiconductors continues to remain high across several industries owing to increased global adoption and extensive use of consumer electronics, coupled with the growing influence of transformative technologies like artificial intelligence, the Internet of Things and machine learning.
This is likely to boost the demand for semiconductors in the near term.
3 Best Choices
We have, thus, selected three mutual funds with significant exposure to semiconductor producers 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 Semiconductors Portfolio fund seeks capital appreciation. FSELX normally invests at least 80% of its assets in common stocks of companies principally engaged in the design, manufacture, or sale of electronic components (semiconductors, connectors, printed circuit boards and other components); equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.
Fidelity Select Semiconductors Portfolio fund has a track of positive total returns for over 10 years. Specifically, FSELX’s returns over the three and five-year benchmarks are 30.4% and 27.6%, respectively. The annual expense ratio of 0.69% is lower than the category average of 1.05%. Fidelity Select Semiconductors Portfolio fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.
Janus Henderson Global Technology and Innovation Fund aims for long-term growth of capital and specializes in technology. JNGTX invests at least the majority of its net assets in securities of companies that the portfolio manager believes will benefit significantly from advances or improvements in technology.
Janus Henderson Global Technology and Innovation Fund has a track of positive total returns for over 10 years. Specifically, JNGTX’s returns over the three and five-year benchmarks are 4.2% and 13.8%, respectively. The annual expense ratio of 0.91% is lower than the category average of 1.05%. Janus Henderson Global Technology and Innovation Fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.
DWS Science and Technology A fund seeks growth of capital. Under normal circumstances, KTCAX invests at least 80% of net assets in common stocks of U.S. companies in the technology sector.
DWS Science and Technology A fund has a track of positive total returns for over 10 years. Specifically, KTCAX’s returns over the three and five-year benchmarks are 6.5% and 13.8%, respectively. The annual expense ratio of 0.69% is lower than the category average of 1.05%. DWS Science and Technology A fund has a Zacks Mutual Fund Rank #1.
To see how this fund performed compared to its category and other #1 or 2 Ranked Mutual Funds, please click here.
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