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ISM Services Index Clocks 101st Month of Growth: 4 Picks

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There are fresh signs of healthy business conditions and improving economy as the services sector grew at a faster clip in June. This is the 101st straight month of expansion with 17 non-manufacturing industries reporting growth. Any reading above 50 indicates that the said sector is expanding.

Although respondents of the survey conducted by the Institute for Supply Management (ISM) expressed tariff, capacity constraint and delivery related concerns, they remained positive about business conditions and the overall economy.

Business Activity & New Orders Rise, Employment Falls Slightly

The ISM Business Activity Index registered growth of 63.9% in June, up 2.6% from the May reading of 61.3%, growing for the 107th consecutive month. Increase in business activity was reported by 16 industries driven by strength in global demand.

The index for New Orders jumped to 63.2% in June from 60.5% in May, marking the 89th straight month of increase. The surge was driven by new sales orders for higher units. In June, 17 industries reported growth.

Employment Index recorded 52nd consecutive month of expansion but was down slightly sequentially. Its reading was 53.6%, down 0.5% from the May reading of 54.1%. While 12 industries reported increase in employment, three reported a decline. A tight labor market is making employee retention competitive.

Business Services Industry in the Pink

The long streak of expansion indicates that the broader economy is on track for steady growth this year. After all, the non-manufacturing sector accounts for nearly 90% of the economy. The business services sector is gaining strength because it is firmly tied to non-manufacturing activities and the broader economy.

4 Great Picks

Given the promising developments in the service sector, investors may consider buying sound stocks from the space. It is crucial to pick winning stocks in order to reap maximum gains.

This is where our VGM Score  comes in. Here V stands for Value, G for Growth and M for Momentum and the score is a weighted combination of these three scores. Such a score allows you to eliminate the negative aspects of stocks and select winners. However, it is important to keep in mind that each Style Score will carry a different weight while arriving at a VGM Score.

We have narrowed down our search to the following stocks, each of which has a Zacks Rank #1 (Strong Buy) or 2 (Buy), VGM Score of A or B and a solid earnings outlook for the year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Korn/Ferry International (KFY - Free Report) is a global provider of talent management solutions. It sports a Zacks Rank #1 and has a VGM Score of A.The company’s expected earnings growth rate for the current year is 18.4%. The Zacks Consensus Estimate for the current year improved 5.2% in the last 60 days.

Korn/Ferry International Revenue (TTM)

The Dun & Bradstreet Corporation (DNB - Free Report) is a leading provider of commercial information that serves a diverse set of customer needs globally. It has a Zacks Rank #1 and a VGM Score of B. The company’s expected earnings growth rate for the current year is 15.1%. The Zacks Consensus Estimate for the current year improved 4.3% in the last 60 days.

The Dun & Bradstreet Corporation Revenue (TTM)

Advanced Disposal Services, Inc. (ADSW - Free Report) is a provider of non-hazardous solid waste collection, transfer, recycling, and disposal services. It has a Zacks Rank #2 and a VGM Score of A. The company has expected earnings growth rate of 34% for the current year. The Zacks Consensus Estimate for the current year moved up 5% in the last 60 days.

Advanced Disposal Services Inc. Revenue (TTM)

General Finance Corporation (GFN - Free Report) is a specialty rental services company. It has a Zacks Rank #2 and a VGM Score of B. The company has expected earnings growth rate of 84% for the current year. The Zacks Consensus Estimate for current year loss narrowed 25% in the last 60 days.

General Finance Corporation Revenue (TTM)

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