US Job Market Roars Back To Life: Top 5 Gainers

U.S. stock indices closed the first week of July higher on robust jobs data, representing the second highest number of job addition in the year. The latest jobs data gave investors confidence in the strength of the economy.

Almost every industry added jobs in June, with education and health services, leisure and hospitality, professional and business services, financial activities and energy companies remaining at the forefront, exceeding Wall Street’s expectations. This is why adding stocks from these areas seem sensible at the moment.

Hiring Grows in Spring

The U.S. economy added 222,000 jobs in June as hiring picked up pace in the spring despite the growing shortage of skilled workers. The rise was the highest in the last four months and the second largest this year. The jump in payrolls followed a discouraging May that saw 152,000 new jobs. However, this figure was revised higher from an initially reported 138,000, while April’s figures were also revised upward from 174,000 to 207,000.

At the same time, unemployment rate ticked up to 4.4% in June from a 16-year low of 4.3% in May as more number of people entered the labor force. The labor-force participation rate edged higher to 62.8%. Since January, the jobless rate has declined by 0.4 percentage point. Hourly pay, in the meanwhile, rose 0.2% to $26.25 an hour in June. In the past 12 months, wages rose a modest 2.5%.

Here are some of the reactions to the Labor Department’s report on upbeat job creations last month:

“June job gains bounced back and revisions pushed previous readings for April and May, which signals that the apparent weakness in past months was just a blip due in part to late data reporting” – Danielle Hale, managing director of housing research at the National Association of Realtors.

“Major slowdown in job growth was premature, while wage growth may resume accelerating later in the year” – Gad Levanon, chief economist, North America for The Conference Board.

“June has historically seen relatively strong employment gains, as recent college grads land their first jobs” – Svenja Gudell, chief economist at Zillow.

Every Industry Added Jobs in June

Job gains were broad-based, with health care companies hiring 37,000 workers. Hospitals continue to add employees for years to enhance care for the ageing population and tackle the sweeping changes brought about by the Obamacare. Lest we forget, the Senate Republicans unveiled a new Bill that won’t change the Obamacare as drastically as the House legislation passed in May (read more: Republicans Present Healthcare Bill: Top 5 Gainers).

The bulk of job growth came from the much larger sectors of leisure and hospitality at 36,000. Professional and business services added 35,000 jobs, which turned out to be another area of strong employment growth. Restaurants beefed up staff by 29,000, while banks and insurance firms added payrolls by 29,000. Banks, especially, are benefitting from the positive annual “stress test” results, Fed’s rate hikes and the Trump administration’s initiative to push for lesser regulations (read more: Big Banks Pass Fed's "Stress Test": 3 Top Winners).

Retailers have also found some respite from online sellers, adding workers for the first time in five months. Meanwhile, energy companies, involved in fracking – extracting oil and gas from rock formations – added jobs for eight straight months. For two years at a stretch, the industry had suffered heavy layoffs due to a slump in oil prices.

The following table shows the number of job added by select industries last month:

Source: Bureau of Labor Statistics

5 Solid Winners

With the U.S. job market making a strong comeback last month, there is enough evidence that the labor market is in the pink. Picking stocks from education and health services, leisure and hospitality, professional and business services, financial activities and energy companies involved in fracking seems to be a smart option at this point, since they continue to be leading in job addition.

However, picking the winning stocks may be difficult. This is where our VGM score comes in handy. 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 based on a good Zacks Rank and VGM score.

Nobilis Health Corp (NYSE:HLTH) owns and manages healthcare facilities in the States of Texas and Arizona, consisting primarily of ambulatory surgery centers and acute-care and surgical hospitals. The company has a Zacks Rank #1 (Strong Buy) and a VGM of ‘A’. The Zacks Consensus Estimate for its current year earnings soared 250% over the last 60 days. The company is likely to give a return of 27.3% this year, higher than the Medical - HMOs industry’s projected gain of 15.6%.

Extended Stay America Inc (NYSE:STAY) is an integrated owner/operator of company-branded hotels in North America. The company operates in hotel operations segment. Extended Stay America has a Zacks Rank #2 (Buy) and a VGM of ‘B’. The Zacks Consensus Estimate for its current year earnings increased almost 3% over the last 60 days. The company is likely to yield a return of 5.3% this year, higher than the Hotels and Motels industry’s projected gain of 0.2%.

SYNNEX Corporation (NYSE:SNX) is a business process services company. The company has a Zacks Rank #1 and a VGM of ‘B’. The Zacks Consensus Estimate for its current year earnings rose 5.9% over the last 60 days. The company is likely to give a return of 19.8% this year, more than the Business - Software Services industry’s estimated gain of 12.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Citizens Financial Group Inc (NYSE:CFG) is a retail bank holding company. The company has a Zacks Rank #2 and a VGM of ‘B’. The Zacks Consensus Estimate for its current year earnings advanced 0.8% over the last 60 days. The company is likely to yield a return of 27.8% this year, better than the Financial - Savings and Loan industry’s projected gain of 10.5%.

W&T Offshore, Inc. (NYSE:WTI) is an independent oil and natural gas producer involved in the fracking business. The company has a Zacks Rank #2 and a VGM of ‘A’. The Zacks Consensus Estimate for its current year earnings surged 23.4% over the last 60 days. The company is likely to give a return of 165.3% this year, higher than the Oil and Gas - Exploration and Production - United States industry’s expected gain of 28.2%.

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