Per the latest report from the Institute of Supply Management (ISM) on Aug 3, manufacturing activity in the United States rose for the third consecutive month in July. Of the 18 manufacturing industries that were surveyed, 13 reported growth.

These industries included Wood Products, furniture & related products, textile mills, printing & related support activities, food, beverage & tobacco products, plastics & rubber products, chemical products, apparel, leather & allied products, computer & electronic products, primary metals, petroleum & coal products, miscellaneous manufacturing, and electrical equipment, appliances & components.

Under such circumstances, investing in mutual funds having significant exposure to the manufacturing and industrial companies seems prudent.

U.S. Manufacturing Activity Hits a 15-Month High

The ISM Manufacturing Index increased to 54.2% in July from 52.6% in the previous month. The metric also surpassed the consensus estimate of 53.5% and reached its highest settlement in the past 15 months. A level above 50% implies that the manufacturing sector is expanding.

The new orders index increased 5.1 percentage points to 61.5% in July. Meanwhile, the production index increased 4.8 percentage points to hit 62.1%. Notably, the employment index increased 2.2 percentage points to hit 44.3%.

Additionally, the prices index increased 1.9 percentage points to 53.2%, reflecting an increase in raw materialprices for the second month on the trot. A prices index above 52.5% is considered consistent with an increase in the Bureau of Labor Statistics (BLS) Producer Price Index for Intermediate Materials.

Meanwhile, on Aug 4, the Commerce Department stated that U.S. factory orders for July rose 6.2% to $437.2 billion. Further, new orders for manufactured durable goods also increased 7.6% to $207.2 billion in the month. Orders for transportation equipment rose 20.2% in July to $55.4 billion, providing a major boost to overall growth.

3 Best Funds to Buy Now

Given such positives, we have highlighted three mutual funds 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 (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Automotive Portfolio (FSAVX Quick QuoteFSAVX - Free Report) fund seeks capital appreciation. This fund invests the majority of its assets in common stocks of companies involved in the manufacture, marketing or sale of automobiles, trucks, specialty vehicles, parts, tires and related services.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 8.3% over the three-year and 4% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSAVXhas a Zacks Mutual Fund Rank #2 and an annual expense ratio of 1.00%, which is below the category average of 1.27%.

Fidelity Select Chemicals Portfolio (FSCHX Quick QuoteFSCHX - Free Report) fund seeks capital appreciation. The fund normally invests at least 80% of its assets in common stocks of companies principally engaged in the research, development, manufacture, or marketing of products or services related to the chemical process industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 1.9% over the five-year benchmark. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSCHX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.78%, which is below the category average of 1.36%.

Fidelity Select Industrials Portfolio (FCYIX Quick QuoteFCYIX - Free Report) fund seeks capital appreciation. It normally invests a large portion of its assets in the common stock of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 1.8% over the three-year and 4.8% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FCYIX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.76%, which is below the category average of 1.10%.

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