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Services Sector Expands in December: 5 Stocks to Buy

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The services sector in the United States has been doing well for a while now. According to the latest reading from the Institute of Supply Management (ISM), the services purchasing managers’ index (PMI) for December rose to 57.2% from 55.9% in November. 

Services sector growth had slowed down after the coronavirus outbreak when businesses came to a standstill with governments imposing lockdowns. However, things started changing once the economy started reopening. And with COVID-19 immunization having started in the nation, the space is likely to flourish in the days to come.

Services Activity Logs Growth

The PMI reading of 57.2% for December once again proves the rapid pace of expansion in business activity at a fast rate ever since the economy reopened in June. This is also the seventh straight month of growth in services activity in the country. Moreover, the services sector has grown for 129 months in the past 131.

The contraction was seen only in April and May when services activity had declined to 41.8% and 45.4%, respectively, as almost the entire country had to be closed own due to the pandemic

Per the ISM report, services industries that registered maximum growth were management of companies & support services; wholesale trade; retail trade; health care & social assistance; transportation & warehousing; finance & insurance; and utilities and agriculture.

Tech Sector Gives Boost to Services Activity

The pandemic saw an increasing number of people becoming technology dependent, which gave a boost to tech services as people everyone started doing everything from home, including working, learning and shopping.

This also saw many tech companies shifting focus toward cloud business. Thus technology services became one of the mainstays for business services. Per the ISM report, Business Activity Index increased 59.4% in December from 58% in November. This also marks the seventh consecutive month of increase in business activity. New Orders Index Increased 58.5% in December from 57.2% in November.

Business services are only likely to increase in the coming months. Although coronavirus cases are on the rise, two COVID-19 vaccines have been rolled out. This will only help people get back their confidence thus aiding business services to grow.

Our Choices  

The services sector is poised to grow as more people get their confidence back once they take the vaccine. Also, another round of stimulus, which recently got sanctioned, will help the economy recover faster. Given this situation,it would be ideal to invest in these four stocks.

IBEX Limited (IBEX - Free Report) is a provider of outsourced CX solutions. It offers customer support, technical support, inbound/outbound sales, business intelligence and analytics, digital demand generation, and CX surveys and feedback analytics service. 

The company’s expected earnings growth rate for the current year is 23.8%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. IBEX Limitedholds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

APi Group Corporation (APG - Free Report) provides business services of safety, specialty and industrial. The company offers critical pipeline integrity and construction services for energy companies, utilities, public agencies, and contractors, as well as end-to-end fire protection solutions, including design, installation, inspection and service of fire protection systems. 

The company’s expected earnings growth rate for next year is 14.2%. The Zacks Consensus Estimate for current-year earnings has improved 10.8% over the past 60 days. APi Group has a Zacks Rank #2.

SPS Commerce, Inc. (SPSC - Free Report) is a provider of on-demand supply chain management solutions, providing integration, collaboration, connectivity, visibility and data analytics to its customers worldwide. 

The company’s expected earnings growth rate for next year is 15.6%. Its shares have gained 17.7% in the past 60 days. SPS Commerce carries a Zacks Rank #2.

Black Knight Financial Services, Inc. (BKI - Free Report) engages in the provision of integrated technology, workflow automation and data and analytics to the mortgage and real estate industries, through its subsidiaries. It operates through the Technology and Data and Analytics business segments. 

The company’s expected earnings growth rate for next year is 3.5%. The Zacks Consensus Estimate for current-year earnings has improved 2% over the past 60 days. Black Knight Financial Services has a Zacks Rank #2.

MSCI Inc (MSCI - Free Report) provides investment decision support tools, including indexes; portfolio construction and risk management products and services; environmental, Social and governance research and ratings; and real estate research, reporting and benchmarking offerings.

The company’s expected earnings growth rate for next year is 3.5%. The Zacks Consensus Estimate for current-year earnings has improved 0.4% over the past 60 days. MSCI has a Zacks Rank #2

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