The technology sector continues to grow at a rapid pace even with all of the major markets at or near record levels. But the question arises, is there still room for growth for the remainder of 2017 and beyond? The answer is YES. Technology companies have posted solid earnings for the second quarter with the S&P 500 technology sector posting +16.5% year-over-year earnings growth. These positive earnings numbers combined with solid valuations give the sector strong upside growth opportunities. Moreover, low unemployment, an improving jobs picture, and international expansion act as further tailwinds for the sector.
This positive sentiment will help mutual funds that are overweighed in the technology sector produce outsized gains over the next several quarters. We have identified four such funds that are well-positioned to take advantage of the tech surge.
When looking for the best mutual funds, we need a method for narrowing down the universe of potential mutual fund options. This is easily accomplished by utilizing the Zacks Mutual Fund Screener; this tool enables the investor to filter out 60 different categories, and narrow down the scope of mutual fund options. For this writing we utilized 4 of the larger filters, Mutual Fund Rank = 1, Expense Ratio <= 1.1, % Stocks > 65%, and % Technology > 65%. These filters produced 7 funds, and from that list we chose the top 4. We wanted to find the top ranked funds with low expense ratios that are heavily weighted in technology stocks.
Please note, that there will be references to load fees, and expense ratios; if you click on the hyperlinks you will be directed to a brief article explaining in detail what those fees and expenses are, and how they impact your mutual fund returns.
Fidelity® Select Computers Portfolio (MUTF:FDCPX) was incepted in July 1985 and is managed by the Fidelity Group. The objective of this technology fund is to seek capital appreciation. The fund normally invests at least 80% of assets in common stocks of companies principally engaged in research, design, development, manufacture, or distribution of products, processes, or services that relate to currently available or experimental hardware technology within the computer industry. The fund offers dividends and capital gains in April and December.
Cost specifics: The minimum initial investment is $2,500, it has no load fees, but does have a 0.55% management fee, a 0.75% redemption fee, and a total expense ratio of 0.81.
Performance and Management: YTD +16.49%, 1 year 37.72%, 5 year +12.04%, and 10 year +9.42%. FDCPX is managed by Christopher Lin who earned his economics degree from Harvard with honors. He has managed this portfolio since 2013.
Columbia Global Technology Growth (MUTF:CMTFX) was incepted in November 2002 and is managed by Columbia Management Advisors, Inc. The fund seeks capital appreciation. Under normal market conditions, the manager invests at least 80% of the fund's total assets in stocks of technology companies that may benefit from technological improvements, advancements or developments. The fund invests in companies of all sizes, and expects to invest a significant percentage of its assets in small and mid-cap companies. The fund may also invest, to a limited extent, in foreign securities, including American Depositary Receipts. Dividends and capital gains, if any, are distributed annually.
Cost specifics: There is a minimum $2,500 initial investment, with a 0.87% management fee, and a total expense ratio of 1.08. This fund does not have any load fees.
Performance and Management: YTD +20.95%, 1 year +37.03%, 5 year +22.10%, and 10 year +10.35%. CMTFX is managed by Rahul Narang who has won the Lipper Fund Award for the Best in three-year performance Science Technology fund category. He has managed this fund since 2012.
Top Holdings: As of the most recent filing the portfolio held some of the big tech names including Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL), Apple, Amazon (NASDAQ:AMZN), Facebook, Nvidia (NASDAQ:NVDA), and Applied Materials (NASDAQ:AMAT).
Fidelity® Select Semiconductors Portfolio (MUTF:FSELX) was incepted in July 1985 and is managed by Fidelity Group. The objective of the fund is to seek capital appreciation. The fund normally invests at least 80% of 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. The fund offers dividends and capital gains twice a year in April and December.
Cost specifics: The minimum initial investment is $2,500, it has no load fees, yet it does have a 0.55% management fee, a 0.75% redemption fee, and a total expense ratio of 0.75.
Performance and Management: YTD +10.5%, 1 year +41.15%, 5 year 23.15%, and 10 year +10.61%. FSELX is managed by Steve S Barwikowski who has managed the portfolio since 2009.
Top Holdings: As of the most recent filing, the portfolio held Intel Corporation (NASDAQ:INTC), Qualcomm Inc. (NASDAQ:QCOM), Broadcom Limited (NASDAQ:AVGO), Analog Devices (NASDAQ:ADI), and Micron Technology (NASDAQ:MU).
Fidelity® Select Technology (MUTF:FSPTX) was incepted on July 14, 1981, and is managed by the Fidelity Group. The objective of the fund is to seek capital appreciation. Normally the fund invests at least 80% of assets in common stocks of companies principally engaged in offering, using, or developing products, processes, or services that will provide or will benefit significantly from technological advances and improvements. The fund offers dividends and capital gains twice a year in the month of April and December.
Cost specifics: The minimum initial investment is $2,500, there are no load fees associated with the fund, but it does have a 0.55% management fee, and a total expense ratio of 0.76.
Performance and Management: YTD +27.83%, 1 year +44.45%, 5 year 18.42%, 10 year +11.42%. FSPTX is managed by Charlie Chai who is a CFA, with a BS degree in math and economics from Dartmouth College. Mr. Chai has been managing this fund since 2007.