Forget “Stuff”… Investors Today Should Buy “Services” Stocks
I recently spent $5,000 on my kids in one single weekend…
And I’ve got absolutely nothing to show for it.
OK, that’s not totally true… My girls have a couple dinner menus folded into origami birds and a couple of cheap Disney t-shirts.
But that’s it? For five grand?!
Today, I want your honest opinion. Did I make a horrible financial decision? Or was this a worthwhile “investment” that I should be proud of?
Oh, and let’s also talk about how you can get paid when other families pull out their checkbooks to also make big purchases like this.
Most of the Money You Spend Isn’t on “Things”
I’ll be frank with you…
The $5,000 I spent for my twins’ tenth birthday may have been the best purchase I’ve ever made.
Sure, I can’t put my hands on what I bought with that money. But take a look at the smiles on my girls faces in the picture below and try to tell me that this wasn’t money well spent!
You see, I spent money to take my twin girls on a Disney cruise for their tenth birthday.
The girls loved their treasure hunt on the ship, eating their weight in ice cream, shooting down the on-board water slide, and just sitting on the ship deck watching the ocean slip by.
We even got to swim with tropical fish and sea turtles!
In short, our cruise was an unforgettable experience that the girls will remember for the rest of their lives!
I’m thankful we had the opportunity to take this trip. And around the country, other families are making similar purchases and enjoying special experiences with their loved ones.
This sets up some tremendous opportunities for investors to profit from companies that sell a wide variety of services to individuals and families.
You see, with the strong economy and a growing job market, consumers have extra money to spend. And according to the most recent government data, our shoppers are spending more and more on services instead of just buying “stuff.” 1
A half-century ago, more than half of all consumer spending was on tangible items that you can touch and feel. But today, almost 70% of consumer spending is now on services. And as this trend continues, investors like you and me have more opportunities to tap into new areas of profit.
How to Profit from More “Service Spending”
As I look through the stocks on my watch list, many of them tie directly into this theme of strong consumer spending on services. As profits for these businesses grow, the stock prices should continue to trend higher. Also, these companies will have more cash to eventually raise their dividend payments.
There are three primary service categories that I’m focused on right now, and there are literally dozens of investments we can track in each category.
Service Category #1: Subscriptions
Many service companies are now offering subscriptions to customers that are paid on a monthly, quarterly, or annual basis. This is great both for the customer as well as the companies offering subscription services.
For buyers, a subscription model makes many services more affordable than they would be if offered as a single purchase.
A good example is how you used to have to pay hundreds (or thousands) of dollars to get a particular program on your computer. But now, you can pay a much smaller monthly fee and get the latest version of a program — always updated — with even better functionality.
Companies love this type of service because revenues come in month after month, it’s easier to know what to expect, and profits continue to pour in as long as customers use the program.
Service Category #2: Travel
Who doesn’t want to visit new places and see new sights?
Many of us also have family members or close friends who live in other parts of the country — or other parts of the world!
Travel is one of the primary areas of discretionary spending that picks up when people have more money to spend on themselves. And there are many different ways investors can tap into travel purchases.
Think about airline stocks, lodging companies, booking services and many other companies that are tied directly to the travel industry. Many of these companies are enjoying tremendous growth in profits, thanks to consumers who have a hunger for travel.
And don’t forget, there are other factors (like low energy costs) that can cause certain companies in this category to do even better than their peers.
Service Category #3: Entertainment
Whenever I finish a long week full of market research, trading and writing, I need a little time to decompress.
Often that means taking the kids to do something active and blow off some steam. A couple of our favorite spots include an indoor rock climbing gym close to our house and a trampoline park that the kids love. Sometimes we’ll also do dinner and a movie once we’re worn out.
Some weekends we’ll also splurge on a local theme park, or rent kayaks at a nearby lake.
These are just a couple of examples of entertainment services that are capturing a larger portion of consumer spending.
As investors, we can take advantage of this spending by investing in the companies directly profiting from cash spent on services.
It’s a growing area of our economy, and a great way to tap into an area of the market that is flourishing.
Here’s to growing and protecting your wealth!