Mutual Funds to Buy Before the Rebound


TSC Ratings provides exclusive stock, ETF and mutual fund ratings and commentary based on award-winning, proprietary tools. Its "safety first" approach to investing aims to reduce risk while seeking solid outperformance on a total return basis.

Almost a third of stock mutual funds run by Fidelity Investments returned more than 10% last month, when the S&P 500 Index climbed 8.5%.

Among those 63 mutual funds, three that invest in chemical and technology companies might be worth buying before the economy rebounds. The funds—Fidelity's Select Chemicals Portfolio, Select Materials Portfolio and Advisor Technology Fund—each returned about 14% last month.

Chemical stocks are likely to gain as the recession lifts because manufacturers need them for their products. Technology shares will rise when companies start upgrading their computer systems and consumers can afford to buy electronic devices again.

The Fidelity Select Chemicals Portfolio's (Stock Quote: FSCHX) top two holdings are Monsanto (Stock Quote: MON) and Praxair (Stock Quote: PX). The stocks have returned 12% and 13% this year, respectively, doubling the 5.4 rise of the S&P 500 Chemicals Index.

Chemical companies make up more than half of the Fidelity Select Materials Portfolio (Stock Quote: FSDPX). The fund holds some of the same stocks as the chemicals fund, but offers exposure to metals through Newmont Mining (Stock Quote: NEM) and Freeport-McMoRan (Stock Quote: FCX). Freeport-McMoRan jumped 25% in March on optimism about copper demand.

The Fidelity Advisor Technology Fund (Stock Quote: FATEX) invests heavily in Hewlett-Packard (Stock Quote: HPQ) and Cisco Systems (Stock Quote: CSCO), companies that have been named as potential suitors for Sun Microsystems (Stock Quote: JAVA) now that talks with IBM (Stock Quote: IBM) have broken down. The U.S. General Services Administration has named Hewlett-Packard the centralized buyer for information technology products and services, giving it the inside track to bid on $50 billion in projects.

These funds ranked among the top third of "hold"-rated funds at the end of February. They could be upgraded to "buy" in light of their March performances. Ratings, recently cited for Best Stock Selection from October 2007 through February 2009 , is an independent research provider that combines fundamental and technical analysis to offer investors tremendous value in volatile times.



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