3 Funds to Buy on Smart Factories Revolution
Industry operations are changing on a global scale as more manufacturers feel the need for a better, smarter and integrated system to run their manufacturing units. Smart manufacturing is the solution to this requirement, which enables manufacturing companies to compete better in a global arena.
Investors could thus consider investing in mutual funds that are well-poised to benefit from this trend.
Manufacturers are Embracing Smart Factories
The smart factory market is estimated to be valued at $153.7 billion in 2019. The market, which applies smart manufacturing processes, is expected to witness a CAGR of 9.8% during the forecast 2019-2024 period, per a Markets and Markets report.
In fact, the global economy could add as much as $1.5 trillion to $2.2 trillion every year by 2023 from smart factories, a recent survey by the Capgemini Research Institute revealed. The institute surveyed one thousand executives from firms that have implemented smart factory initiatives.
According to Capgemini, smart factories are taking advantage of “digital platforms and technologies” to gain “significant improvements in productivity, quality, flexibility and service.”
Smart Manufacturing is the Next Industrial Revolution
A major reason for manufacturers to upgrade their factories is increased competition. Consumers today are constantly seeking higher living standards, which is reflected in their demand for finer, better products.
In addition, the rising population needs to be catered as well. In a bid to meet the increasing demand, manufacturers need to up their productivity growth while maintaining the high quality expected of their products.
Smart manufacturing processes not only boost productivity growth, but also maintain the expected level of finesse. The growth in the market for smart factories is being primarily boosted by the fast advancement of IoT, rising implementation of industrial robots andincreasing use of enabling technologies in manufacturing processes.
The manufacturing segment is expected to benefit from not only increased productivity but also from lesser human errors and more production volume. In fact, this realization has increased the number of manufacturers shifting to a complete digital factory over the years. For example, in 2019, about 68% of organizations “had ongoing smart factory projects” against just 43% in 2017, per the Capgemini report.
Needless to say, this shift to smart manufacturing will pick up pace.
Our Choices
We have, therefore, selected three mutual funds that invest in the companies that are working to make way for smart factories’ revolution. All these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy). Moreover, these funds have encouraging year-to-date returns. Additionally, the minimum initial investment is within $5,000.
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 Wireless Portfolio FWRLX aims for capital growth. The fund invests the majority of its assets in companies that are engaged in activities involving wireless communications services or products. The non-diversified fund mostly invests in common stocks of companies. AT&T, Verizon Communications and T-Mobile US are among the fund’s top 10 holdings.
This Zacks sector – Tech 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.
FWRLX carries a Zacks Mutual Fund Rank #1 and has an annual expense ratio of 0.83%, which is below the category average of 1.24%. It has returned 30.2% on a year-to-date basis. FWRLX has no minimum initial investment.
Fidelity Select Semiconductors Portfolio FSELX aims for capital appreciation. The fund invests the majority of its assets in companies that design, manufacture or market semiconductors and semiconductor equipment. FSELX mostly invests in common stocks. The non-diversified fund invests in both U.S. and non-U.S. funds. Intel Corp, Broadcom Inc and Qualcomm Inc are among the fund’s top 10 holdings.
This Zacks sector – Tech 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.
FSELX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.73%, which is below the category average of 1.30%. It has returned 45.1% on a year-to-date basis. FSELX has no minimum initial investment.
Franklin DynaTech Fund Class A FKDNX seeks capital growth. The fund invests the majority of its assets in companies that the fund manager believes benefit greatly from new technology and new industry conditions. Amazon.com Inc is the fund’s top holding.
This Zacks sector – Tech 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.
FKDNX carries a Zacks Mutual Fund Rank #2 and has an annual expense ratio of 0.87%, which is below the category average of 1.08%. It has returned 28.1% on a year-to-date basis. FKDNX has a minimum initial investment of $1000.
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