Despite Wall Street’s seven-day run, the media is still fixated on the government cuts that are taking effect right now and how they will weigh on the economy. I understand that printing doomsday scenarios generates more clicks, but getting distracted by negative headlines is not the way to make money in this market.
Today, I’ll show you what you should be focusing on instead: A pocket of the U.S. economy that is actually heating up.
While Washington continues to be somewhat of a basket case, a group of American businesses are stepping up to the plate to keep the economy’s momentum going. I’m talking about the Service sector, which of course covers all businesses that produce services rather than goods. These include healthcare providers, hotels, restaurants, transportation companies and the like.
Here’s why it pays to take a closer look at the Service sector:
- The Service sector accounts for 70% of the U.S. workforce.
- In January, the ISM’s service index grew at the fastest pace in a year as order backlogs ballooned.
- In February, 3/4 of the total jobs created that month were from the Service sector—179,000.
- Over 70% of the jobs lost in services industries during the recession have returned (compared with 15% of jobs lost in manufacturing and construction).
This is all great news because it shows that household balance sheets are firming up. Slowly but surely, consumers are spending more on services; this translates into sales and earnings growth for these companies. This year, the average Service sector company is expected to grow earnings by 23.9%—nearly three times the S&P 500 average.
That being said, here is a sampling of the companies you should keep on your radar:
|Ticker||Company||Industry||Quantitative Grade||Fundamental Grade||My Take|
|MTB||M&T Bank||Commercial Banking||B||B||Buy|
|YHOO||Yahoo||Internet Services||A||B||Strong Buy|
There are plenty of exciting profit opportunities coming out of this sector, so I’ll continue to be on the lookout for new recommendations in the coming weeks. To switch things up tomorrow, I’ll steer you towards the stocks you should steer clear of in this market.