Getting Business in Shape: Four Management Services Stocks for Investors

This morning in our free, daily before-the-bell market newsletter, Morning Coffee with TradingMarkets, (click here to subscribe) we noted the incredible earnings story over at CME Group (CME@CME | Quote | Chart | News | PowerRating). CME Group, which owns and operates the Chicago Mercantile Exchange and the Chicago Board of Trade, credited a surge in trading volumes for its near doubling of fourth quarter profits.

In the way that brokerage stocks were considered excellent proxies for the market in the 1980s, and the best tech stocks were believed to be the superior way to get exposure to the markets of the 1990s, CME has become one of the signature stocks of the current era for traders and investors looking to profit from the ongoing revolution in trading.

But from a PowerRating perspective, mighty CME is essentially an average opportunity for stock investors right now. Its PowerRating of 6 marks the stock as one that can be expected to perform about as well as the average stock in terms of both reliability and performance over the coming year.

However, CME Group belongs to an industry that not only has a relatively high PowerRating, but also has a number of higher PowerRating stocks within it. These stocks, all with PowerRatings of 8 or 9, can be expected to be more reliable and better performers than the average stock -- which right now includes 6-rated CME Group.

Before looking at each of the four stocks in today's discussion, let's take a quick review of the industry to which all of these stocks belong: Business/Management Services. This industry has a PowerRating of 8. Our research, going back to 1995 and consisting of thousands and thousands of simulated trades, revealed that industries with PowerRatings of 8 provided average annualized returns of more than 20%. Compare this to the average annualized performance of the average industry, which returned 14.61% from 1995 to 2006. This makes for a clear preference for high PowerRating industries, such as Business/Management Services, when looking for stocks that are more likely to outperform their peers.

The highest rated stock in the Business/Management Services industry is Iron Mountain (IRM@IRM | Quote | Chart | News | PowerRating). With a PowerRating of 9, Iron Mountain belongs to that class of stocks that has been both more reliable and better performers than the average stock. Based on our research, we found that 9-rated stocks were higher one year later more than 80% of the time. The average stock, by contrast, was higher one year later less than 68% of the time.

Moreover, stocks with PowerRatings of 9 tended to return an average of more than 18% after a year. The average stock had an average return of between 12 and 13%. Advantage: high PowerRating stock.

Iron Mountain was out Featured Stock Spotlight last month in January (click here to read that profile). Iron Mountain provides data storage and security services including records management, data protection and recovery and secure shredding services. The company is based in Boston, Massachusetts.

Iron Mountain has a P/E of 44.50. The stock is trading in the upper half of its 52-week price range from a high of $38.85 to a low of $25.05.

Next up is Hewitt Associates and its Class A shares (HEW@HEW | Quote | Chart | News | PowerRating). Hewitt Associates has a PowerRating of 8, which means that the stock is more than 79% likely to be higher in one year. As an 8-rated stock, Hewitt Associates belongs to that group of stocks that has averaged returns of more than 17% in a year's time.

Hewitt Associates is trading within cents of its 52-week price range from a high of $38.84 to a low of $27.36. The Illinois-based company provides human resources benefit, outsourcing and consulting services for corporations around the world.

Choicepoint (CPS@CPS | Quote | Chart | News | PowerRating) also has a PowerRating of 8. Choicepoint provides identification and credential verification services, as well as background checking, public relations and direct marketing services. Choicepoint has a P/E of 75.50, and is trading in the lower half of its 52-week price range from $44.29 to $31.15.

Lastly is FTI Consulting (FCN@FCN | Quote | Chart | News | PowerRating), with its PowerRating of 8. This Baltimore-based consulting firm provides services such as corporate finance and litigation advising, economic consulting and strategic communications for industries ranging from automotive, chemical and energy to real estate, health care and financial services.

FTI Consulting is trading in the upper half of its 52-week price range from a high of $63.00 to a low of $27.50. The stock has a P/E of 30.50.

David Penn is Senior Editor at PowerRatings.net