One trend that I am currently trying to capitalize on is the trend towards services. Everyone knows that services are increasingly becoming a larger part of the US economy. There are obviously many ways to play this trend - I looked at the causes and characteristics of services to choose the stocks that I like. I got this information the book Marketing Foundations by Gil Harrell.
Growth Factors:
- Technology
- Quality of Life
- Government Deregulation of Services
- Competition in Professional Services
- Privatization
- The need for Specialization
- Access to knowledge
- Growth of Franchises
Characteristics:
- Intangible
- Relationship Based
- Service Connection
- Simultaneous Productions and Consumption
- Perishable
- Quality Control
The two growth factors that I am looking at right now are the technology and the need for specialization. Technology is growing at such a rapid pace that professionals are now needed to do a larger percent of a company's IT needs. Specialization is a company outsourcing work that is not essential to core business operations. This allows the company to focus on the most important parts of their business and potentially save money. Common examples of this would be an hiring an accounting firm, personnel agency or a system consultant. I think the best ways to capitalize on this is to buy an IT consulting firm.
Many larger firms are moving into this space because they are realizing the potential for future profit and growth. Examples include: Dell purchasing Perot Systems for $3.9 Billion and HP buying EDS for $13.9 Billion.
The company that I suggest using to play this trend is Infosys Inc. (NYSE:INFY). It includes all the benefits that I discussed plus it is an Indian company. This will hopefully provide more growth because of India's specialization in technology and their fast growing economy.
