7 Stocks Poised to Profit From the Red-Hot Job Market

Stocks to buy

The concept of stocks for a hot job market comes at an awkward juncture. From the perspective of the Federal Reserve, it sought an excuse to raise interest rates. Now, with nonfarm payrolls coming in hotter than anticipated, it may not be impossible for a policy pivot to occur.

Still, one alternative proposal is that the central bank may take a modest approach to financial engineering. If so, the robust labor market – while carrying inflationary implications – offers one significant positive: more people have more money to spend. And that extra cash will almost certainly work its way into the economy.

Even with the challenges that we have, Americans continue to spend. Indeed, we’re spending money we don’t have, with credit card debt skyrocketing to $1.13 trillion. Yet the machine keeps marching onward. If you believe that the music won’t stop, below are the stocks for a hot job market.

HF Sinclair (DINO)

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In my opinion, the bullish case for HF Sinclair (NYSE:DINO) sells itself. An independent energy company, HF Sinclair produces and markets gasoline, diesel fuel, jet fuel and many other petroleum-based products. Thus, it’s a downstream operator, meaning that it focuses on the marketing and refining end of the hydrocarbon value chain. Stated differently, if it goes in your car, it’s downstream.

One of the cynical factors that make DINO a compelling idea for stocks for a hot job market is the broader economic backdrop. Yes, electric vehicles are becoming more commonplace. However, the vast majority of people drive combustion-powered vehicles. Further, when discussing new energy vehicles, it’s hybrids that have dominated the discourse. Guess what? Hybrids need gasoline.

With more people having jobs, workers make enough to afford the rising prices of gasoline. However, they’re not making so much that they can make the jump to EVs. Therefore, DINO’s assessment as a moderate buy is quite reasonable. Wall Street’s experts believe shares can rise to $66, with the high-side target hitting $78.

Carmax (KMX)

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Given the recent volatility in used-car dealership Carmax (NYSE:KMX), KMX seems an unusually risky idea for stocks for a hot job market. Indeed, management didn’t offer an encouraging outlook during its most recent earnings call. Further, inflation remains hot (naturally) and borrowing costs are also elevated. This dynamic is hampering demand for big-ticket items.

However, the reality is that vehicles – whether they be combustion powered or otherwise – are mechanical products. Mechanical products eventually wear down or in the case of EVs don’t hold their charge. Now, in certain parts of the country (mainly in the east coast), you can get away without having a personal vehicle.

Try that in California or anywhere else. You’re just not going to get that far. And so, we come across a harsh reality: used cars may be an inevitability.

Sure, the latest projections for the current fiscal year call for earnings per share of $3.41 on sales of $26.64 billion. That implies very modest growth on the top line. However, because of the necessity of personal transportation, the high-side metrics of $4.10 EPS on revenue of $28.58 billion isn’t out of the question.

Apple (AAPL)

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One of the challenges associated with consumer technology giant Apple (NASDAQ:AAPL) is commoditization. When the company launched its first iPhone, it truly revolutionized the world. It singlehandedly pioneered an entirely new product category. Then came other smart devices, which have done the company so well. However, these devices are no longer special and cheaper copycats have sprouted everywhere.

That said, what I appreciate about the “fruit” brand is that it commands social cachet. It’s not just about the devices but the underlying Apple ecosystem. Therefore, with the unemployment rate coming in lower than expected, people may be incentivized to boost their discretionary spending. If so, I can see Apple leveraging this social cachet to its advantage.

For the current fiscal year, analysts are seeking EPS of $6.55, a noticeable bump up from last year’s print of $6.13. Now, the top line is much more modest, with projected sales of $386.51 billion less than 1% up from fiscal 2023’s result. However, fiscal 2025 could see sales jump to nearly $412 billion. Thus, AAPL could rank among the stocks for a hot job market.

Amazon (AMZN)

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A company that needs no introduction, Amazon (NASDAQ:AMZN) represents one of the top stocks for a hot job market. Fundamentally, the company pioneered the e-commerce revolution. What’s remarkable is that post-pandemic, consumers have gravitated toward online transactions. Significantly, e-commerce transactions as a percentage of total retail sales have been steadily rising since the second quarter of 2022.

Back during the worst of the Covid-19 crisis (Q2 2020), this metric soared to a record 16.5%. It will be difficult to match that level of scope and scale. Yet we’re close, with e-commerce transactions coming in at 15.6% of total sales in Q4 2023. Conspicuously, this rise occurred during a period of rising inflation and rising interest rates.

It’s possible that consumers may have acclimated to the inflationary paradigm. If so, AMZN could be a compelling idea for stocks for a hot job market. With the unemployment rate so low, people could resume their obsession with online transactions.

Presently, experts rate AMZN a unanimous strong buy with a $212.21 average price target. It’s a reasonable assessment given the underlying relevance.

Starbucks (SBUX)

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Based on broader economic challenges, I’ve been skeptical about the prospects for Starbucks (NASDAQ:SBUX). Yes, it’s pretty much the reason for existence among suburban America. It may be responsible for maintaining the mental health of white-collar office workers. Yet its caffeinated products are heavily overpriced. You know what I’m talking about if you go to one.

Still, a combination of a robust labor market and broader normalization trends (i.e. return to office) could inspire the need for psychological rewards. People need their caffeine to lift their spirits and admittedly, Starbucks’ products feature an addictive nature. Your brain fills with endorphins the moment you walk in. That’s probably by design.

Covering experts believe the company’s EPS will land at $4.04 in fiscal 2024. That’s a big improvement over last year’s print of $3.54. Also, sales could clock in at $38.75 billion, up 7.7% from 2023’s tally of $35.98 billion.

What’s notable is that in fiscal 2025, analysts are seeking revenue of $42.46 billion, up 10% from projected 2024 sales. So, it could be one of the stocks for a hot job market.

Darden Restaurants (DRI)

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An intriguing but risky idea for stocks for a hot job market, Darden Restaurants (NYSE:DRI) could potentially benefit from the increase in discretionary funds. To be clear, it’s not an argument without downside concerns. With so many Americans deeply indebted, one of the easiest budget items to cut is entertainment.

That said, an increase in the employment rate suggests that people will be looking to blow off some steam during happy hours or the weekends. From that angle, DRI stock could make sense. Also, it’s important to consider Darden’s acquisition of premium steakhouse Ruth’s Chris. This buyout could help Darden target the higher-income crowd, who may be looking for distinct experiences.

Analysts are overall bullish on DRI stock, pegging it a consensus strong buy. Further, for the current fiscal year, they’re anticipating EPS of $8.85, a big improvement over last year’s print of $7.99. As for the top line, the experts are targeting sales of $11.41 billion, up almost 9% from the prior year.

Universal Technical Institute (UTI)

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Although the labor market is booming, not everyone will win out. That’s just economic reality. On a related point, not everyone will be satisfied with their income. I’d venture to say that with the inflationary pressures, most people are dissatisfied with their compensation. And that’s where Universal Technical Institute (NYSE:UTI) comes into play. Basically, the company provides real skills that are in high demand.

The company provides vocational education geared toward the transportation or mobility space. What’s really intriguing here is the fading demand for plug-in electric-powered vehicles. Stated differently, combustion-based platforms should enjoy extended relevancy. That means the addressable market for mechanics may be larger than previously anticipated.

For the current fiscal year, covering experts are seeking EPS of 70 cents. That’s a huge leap up from last year’s result of 13 cents EPS. Also, revenue is expected to land at $716.09 million. That’s up 17.9% from 2023’s haul of $607.41 million.

Finally, analysts rate UTI a unanimous strong buy with a $17.60 price target. It’s one of the stocks for a hot job market.

On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare. Tweet him at @EnomotoMedia.

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