This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

3 Ways to Play the Economic Data in 2011

Stocks in this article: COH PAYX VNQ

BALTIMORE ( Stockpickr) -- Since the financial crisis of 2008, economic data have become a mainstream indicator of the world's market pulse. Suddenly, Main Street investors are paying attention to metrics such as housing starts and jobless claims, and the broad market is reacting directly to new data as soon as it hits the street.

For investors, that increased interest in economic data is a trend that's worth exploring.

To do that, it's important to know where to focus your efforts. The truth is that some stocks are more susceptible to the market's economic news than others. By honing in on trades that have higher data-induced volatility, traders can actually eke out gains from this market. This isn't the first time we've looked at the investability of economic indicators; back in August, we took a look at three ways to play the data.

Related: Earnings Trades for the Week

Now, though, with a new market tone being set in 2011, it's time to look at three updated ways to trade that economic data.

1. Jobs Numbers

The only economic indicator play that hasn't changed in 2011 is jobs data. Jobs data continues to be one of the most hotly anticipated sets of numbers that comes out each week, and for good reason. Higher employment rates mean that the U.S. population has more income to spend on products and services. Jobs numbers are also a trailing indicator that suggests whether firms are seeing high enough utilization to justify increasing their headcounts. Clearly, then, this metric has a big impact on the stock market.

But I still think that the best way to play the trend is through Paychex (PAYX), the $11.6 billion payroll processing and HR outsourcing firm that caters primarily to small and medium-sized businesses. Since we discussed the stock back in August, the unemployment rate has dropped, and nonfarm payrolls have climbed higher; in kind, shares of Paychex have rallied more than 25%.

A big part of Paychex's correlation with jobs numbers is the kinds of companies that it services. By focusing on smaller clients, the company's earnings are more elastic -- and they can have bigger swings. At the same time, Paychex has spent considerable time increasing its HR and retirement offerings to existing customers, a factor that helps the company generate higher comparable profits for each additional employee hired by clients.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs