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4 Mutual Funds to Gain on High Holiday Season Sales

Zacks Equity Research

American consumers are on quite a shopping spree this holiday season, thanks to notable shopping trends and easy access to online shopping sites through various retail applications. A range of bargains and offers by brick-and-mortal stores have are also luring shoppers. After all, the strong economic backdrop, notable new jobs and steadily rising income are crucial factors driving sales.

Increased Online and Brick-and-Mortar Sales

This holiday season has been an impressive one for retail, with online sales growing since early November, according to a report by Adobe Analytics. A shorter holiday season coupled with early shopping deals encouraged consumers to start splurging early.

In fact, American shoppers spent $50.1 billion online between Nov 1 and Nov 26, which is 15.8% higher than the levels witnessed in 2018. Of course, an increase in mobile shopping and new marketing trends such as “buy now, pick up in store” have been major contributors this year.

According to the National Retail Foundation, consumers plan to spend a total of $1,048, on average, this holiday season on miscellaneous products such as gift items, decorations and candies.

About 56% of consumers plan to shop online, while 53% intend to shop at department stores and 51% at discount stores. Other popular destinations for holiday shopping include clothing and electronic stores, thrift stores, local businesses, craft and specialty stores.

Consumer Spending Data Stable

To induce optimism in the vibrant holiday shopping season, Americans raised their spending at the fastest pace in four months in November.Consumer spending rose 0.4% last month, which is the largest rise since July.

This data indicates strong spending capacity of American households, thanks to steadily rising incomes. After all, incomes rose an impressive 0.5% in November, rebounding from October’s flat reading. Last month, households increased their spending on cars and trucks. Consumers also spent more on healthcare in the month.

This is why consumer spending on retail products and services could rise this holiday season, because the holiday season has been shorter this year (because of a late Thanksgiving holiday, which shifted Black Friday to December). Given the shorter holiday season, retailers started offering bargains much before holiday season began, which resulted in more sales. The trend is expected to continue.

In that case, one could benefit from investing in funds focused on retail and financial services companies. After all, increased shopping will lead to more financial transactions, which is bound to boost participants in the financial services sector.

Our Choices

We have, therefore, selected four mutual funds that carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) and invest in the financial services and retail sectors. These funds have also provided handsome returns to investors on a year-to-date basis. In addition, the minimum initial investment is within $5,000.

We expect these funds to outperform 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 Banking Portfolio FSRBX fund aims for capital growth. The fund invests majority of its assets in securities of companies, principally engaged in the banking industry. The non-diversified fund invests in both U.S. and non-U.S. funds.

This Zacks sector – Finance product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRBX carries a Zacks Rank #1 and has an annual expense ratio of 0.77%, which is below the category average of 1.41%. It has returned 30.9% on a year-to-date basis. FSRBX has no minimum initial investment.

T. Rowe Price Financial Services Fund PRISX seeks long-term capital growth. The fund invests majority of its assets in the common stocks of companies in the financial services industry. The fund may also invest in companies that derive substantial revenues from conducting business in the financial services industry. PRISX is a non-diversified fund.

This Zacks sector – Finance product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

PRISX carries a Zacks Rank #1 and has an annual expense ratio of 0.87%, which is below the category average of 1.41%. It has returned 27.2% on a year-to-date basis. PRISX has a minimum initial investment of $2500.

Fidelity Select Consumer Discretionary Portfolio FSCPX fund invests majority of its assets in securities of companies that manufacture and distribute consumer discretionary products and services. The non-diversified fund invests in securities of both U.S. and non-U.S. companies. FSCPX seeks capital growth.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSCPX carries a Zacks Rank #1 and has an annual expense ratio of 0.78%, which is below the category average of 1.26%. It has returned 23.6% on a year-to-date basis. FSCPX has no minimum initial investment.

Fidelity Select Retailing Portfolio FSRPX fund aims for capital appreciation. The fund invests majority of its assets in securities of companies that are mostly engaged in marketing finished goods and services to individual consumers. The non-diversified fund invests in securities of both U.S. and non-U.S. companies.

This Zacks sector – Other product has a history of positive total returns for more than 10 years. To see how this fund performed compared to its category, and other 1 and 2 Ranked Mutual Funds, please click here.

FSRPX carries a Zacks Rank #2 and has an annual expense ratio of 0.76%, which is below the category average of 1.26%. It has returned 24.2% on a year-to-date basis. FSRPX has no minimum initial investment.

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