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Business Activity Perks Up in January: 5 Stocks to Buy

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The services sector in the United States has been one of the better performers amid the pandemic. In fact, it is thriving for a while now, with business activity growing. According to the latest reading from IHS Markit, business activity in the United States rose in December driven by strong demand for business services.

The services sector took a hit following the COVID-19 outbreak that saw everything coming to a standstill as governments shut down business thus slowing down growth. However, things started changing as the economy reopened. And with COVID-19 immunization having started in the country, the space is likely to flourish in the days to come.

Services Activity Grows

IHS Markit's composite output index increased to 58 from 55.3 in a reading in early January. This is the highest level in two months. The service-industry business activity index climbed to 57.5 from 54.8, while manufacturing PMI jumped to a new record high of 59.1 from 57.1.

The service industry’s gauge rose primarily because of surging demand from customers. The report further states that business optimism across the service industry remained strong on hopes of eventual reopenings of states that have been partially locked down following the surge in COVID-19 cases and prompter vaccine distribution.

The services sector had witnessed contraction during April and May when almost the entire country had to be closed own due to the pandemic. However, things started looking up once the economy started reopening and since then services industry has been performing well.

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. Needless to say, technology will continue to play an integral role in driving the services sector in the days to come.

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 regain confidence 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 five stocks. Each of the stocks carries a Zacks Rank #2 (Buy). (Add Zacks Rank Promo Link)

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 21.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.5% over the past 60 days.

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 4%. The Zacks Consensus Estimate for current-year earnings has improved 1% over the past 60 days.

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 23.4% in the past three months.

FactSet Research Systems Inc. (FDS - Free Report) is a leading provider of integrated financial information, analytical applications and industry-leading service for the global investment community. 

The company’s expected earnings growth rate for next year is 3.3%. The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the past 60 days.

Wipro Limited (WIT - Free Report) provides comprehensive IT solutions and services, including systems integration, Information Systems outsourcing, package implementation, software application development and maintenance, and research and development services to corporations globally. 

The company’s expected earnings growth rate for next year is 13.6%. The Zacks Consensus Estimate for current-year earnings has improved 4.2% over the past 60 days.

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