The semiconductor market is on track for a steady recovery. After an impressive second quarter, global semiconductor sales jumped once again in July. The steady rise in sales over the past few months suggests that the worst may be over.

Given this situation, funds like DWS Science and Technology A KTCAX, Fidelity Select Semiconductors Portfolio FSELX and Fidelity Advisor Semiconductors Fund Class I FELIX are likely to benefit in the near term.

Semiconductor Sales Continue to Rebound

Global semiconductor sales rose 2.3% to $43.2 billion in July, the Semiconductor Industry Association (SIA) said on Sep 6. This follows a 1.7% rise in June when sales totaled $41.5 billion.

This comes after a solid second quarter that saw semiconductor sales grow 4.7% year over year to $124.5 billion. Semiconductor sales have now grown for five consecutive months, indicating that the industry is on track for a solid recovery.

Industry experts had previously predicted that global semiconductor sales would reach their lowest point by the end of the first quarter before experiencing a solid recovery that would extend throughout 2023.

The report also indicated that sales were expected to see further growth in the second half of the year due to renewed optimism and increased demand for semiconductor products.

Demand for semiconductors slowed in the second half of 2022 after a solid 2020 and 2021, when sales got a boost due to the remote working culture following the COVID-19 outbreak. However, higher prices owing to the Fed’s aggressive monetary tightening policy to curb multi-decade high inflation hampered sales.

Moreover, other geopolitical reasons and the lingering impact of the pandemic further slowed sales during the second half of 2022 and in the initial months of this year.

However, as inflation continues to cool and geopolitical factors ease, the semiconductor market will get a further boost.

Moreover, increasing global adoption and widespread use of consumer electronics, along with the growing impact of technologies such as artificial intelligence, the Internet of Things, and machine learning, are likely to play a key role in driving demand for semiconductors. This trend is anticipated to persist and continue fueling the demand for semiconductors in the near future.

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.

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.

Specifically, DWS Science and Technology A fund’s returns over the three and five-year benchmarks are 10% and 15.5%, respectively. KTCAX carries a Zacks Mutual Fund Rank #1.

To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

Fidelity Select Semiconductors Portfolio fund seeks capital appreciation. FSELX 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.

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 35.1% and 29.1%, respectively. FSELX 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.

Fidelity Advisor Semiconductors Fund Class I fund seeks capital appreciation. FELIX invests primarily in common stocks. Fidelity Advisor Semiconductors Fund Class I normally invests at least 80% of assets in securities of companies principally engaged in the design, manufacture, or sale of electronic components; equipment vendors to electronic component manufacturers; electronic component distributors; and electronic instruments and electronic systems vendors.

Fidelity Advisor Semiconductors Fund Class I fund has a track of positive total returns for over 10 years. Specifically, FELIX’s returns over the three and five-year benchmarks are 33.3% and 27.9%, respectively. To see how this fund performed compared to its category, and other #1 or 2 Ranked Mutual Funds, please click here.

FELIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 1.01%, which is below the category average of 1.05%.
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