Stocks That Boost the Economy

It's the jobs, stupid. The American economy needs far more of them to help our society's high number of jobless get back to fiscal health and boost our overall economic health and productivity. The companies that have slashed significant percentages of their workforces over recent years haven't helped us at all. They've "helped" further bust our economy just when it's needed a boost.

Fortunately, some corporations are acting as economy boosters despite the tough times, hiring more workers and even implementing "no layoff" policies. Let's take a look at some of these companies, which challenge the conventional wisdom about difficult times.

Growing the ranks
Fortune's 2012 "Best Companies to Work For" list focuses on worker well-being and company perks, but it reveals some other interesting factors, too. Some of these companies are actually hiring.

  • Google (Nasdaq: GOOG  ) came in at No. 1, but the list highlights the search giant's 33% job growth, boasting a total 18,500 U.S. employees.
  • Darden Restaurants (NYSE: DRI  ) has racked up a 12% increase in jobs, with a whopping 169,516 U.S. employees.
  • Sunnyvale, Calif.'s NetApp (Nasdaq: NTAP  ) , which provides networked storage solutions, has boosted its workforce by 30% to a total of 6,887 U.S. employees.
  • Amazon.com's (Nasdaq: AMZN  ) subsidiary Zappos has seen a whopping 70% jump in the number of people it employs, with its current U.S. worker count at 3,003.

Keeping the ranks
The last several years' tough economic times have been replete with mass layoffs, helping our unemployment problem become even more bleak in a vicious circle of joblessness. Unfortunately, many investors adhere to Wall Street's conventional wisdom: Layoffs boost profits.

True long-term investors will recognize that this is just a short-term boost, and this kind of behavior is actually very detrimental to the economy, and often to the companies themselves in the future.

Granted, in some cases, companies are in so much financial trouble they have to implement layoffs to survive at all. However, in too many cases, the companies in question are just working to assuage Wall Street analysts' short-term profit expectations.

Common sense says that with innovation, prudence, smart growth plans, and laser focus on long-term goals, companies can keep employees on board and never sacrifice long-term profitability.

Fortune highlighted 14 employers that have never laid off workers, illustrating that it's not an impossible task:

  • Private (and expanding) grocer Wegmans has a policy to find employees new jobs within the company if their positions are eliminated.
  • Retailer The Container Store found other ways to cut costs, right down to using cheaper toilet paper, to make sure it wouldn't have to lay off employees.
  • Even nonprofits must make ends meet. Instead of laying off employees, St. Jude's Children's Research Hospital ratcheted back hiring ("smart growth") and asked employees to figure out even small ways to reduce costs (such as cutting magazine subscriptions), showing that even the smallest sacrifices can add up to keeping everyone employed.
  • Aflac (NYSE: AFL  ) has been around for nearly 60 years, but it also made the no-layoffs list. Emphasizing employee education and cross-training, the insurer works hard to find workers another job in another part of the company when a position is eliminated.

The boosters vs. the busters
As investors, we can look at the aforementioned companies and examples to consider two things. One is the true nature of long-term-growth-oriented companies: Not only do they boost our economy, but they boost our portfolios and the promise of investing in myriad ways.

You can make money by your direct investments in Google and Amazon.com, for example, but their businesses both employ many Americans, giving them the means for growing consumption. They also contribute to a massive ecosystem of commerce, touching many areas, that helps keep our engine running. More consumer activity is good for all investors.

The other is the fact that management teams that can utilize smart growth in order to keep their workforces intact and running smoothly and productively are an economic boon. I've long believed investors should look at mass layoffs as signs of serious management flaws instead of focusing on a "more profitable" short-term view.

Once we've gotten five years down the road, many of these layoff-happy companies will have likely lost their best talent and terrorized and demoralized their "survivors." Those are dangerous stocks to own, Fools.

Don't let your portfolio go bust; remember that layoffs should be a sign of management weakness, not strength. Invest in the growth-oriented companies that act as economic boosters if you want to foster a growing portfolio.

Speaking of growth-oriented investing, Motley Fool analysts have identified three companies that should do well in an extremely growth-oriented area: emerging markets. Check out "3 American Companies Set to Dominate the World," available free today.

Check back at Fool.com every Wednesday and Friday for Alyce Lomax's columns on environmental, social, and governance issues.

Alyce Lomax does not own shares of any of the companies mentioned. The Motley Fool owns shares of Darden Restaurants, Google, Aflac, and Amazon.com. Motley Fool newsletter services have recommended buying shares of Aflac, Amazon.com, and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (18)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 27, 2012, at 5:21 PM, xetn wrote:

    You overlooked MCD's 50000 hires last summer.

    By the way, the only reason any company should hire an employee is if they believe they would contribute more than they cost.

    Any hires beyond this are utter nonsense. That is the pretense of government "jobs" which are all mostly non-productive because they live off of the private sector. I believe that is called a parasite.

  • Report this Comment On January 28, 2012, at 8:16 AM, TMFLomax wrote:

    xetn,

    That's part of what I meant by "smart growth," increasing hiring because the company's actually growing and growth oriented. I think some companies bloat up without thinking about the long term and then think little of slashing their ranks when they need to "boost profitability" in tougher times. I believe that happens a lot in the boom/bust cycles, which certainly doesn't help once things "bust." That's not sustainable and I believe it's very flawed thinking. Don't hire more than you need, and then try to keep the ones you have hired instead of all the short termism that's been common.

    Best,

    Alyce

  • Report this Comment On January 29, 2012, at 7:52 PM, skypilot2005 wrote:

    Alyce wrote:

    “I've long believed investors should look at mass layoffs as signs of serious management flaws instead of focusing on a "more profitable" short-term view.”

    I agree. IMO mass layoffs reveal a corporation’s “Culture”, as well.

    As an investor, I do not invest in companies that have had mass layoffs.

    Sky Pilot

  • Report this Comment On January 30, 2012, at 7:32 AM, TMFLomax wrote:

    Good point, Sky Pilot! Thanks for adding that. Culture is important too, and a negative one isn't a positive for investors.

    Best,

    Alyce

  • Report this Comment On February 01, 2012, at 2:31 PM, DJDynamicNC wrote:

    "By the way, the only reason any company should hire an employee is if they believe they would contribute more than they cost.

    Any hires beyond this are utter nonsense."

    Agreed. A proper cost/benefit analysis should include the cost of NOT hiring a prospective employee as well, of course - lost productivity from an overworked labour force, inability to meet demand, overlooked mistakes and more can arise from running too tight a work force.

    " That is the pretense of government "jobs" which are all mostly non-productive because they live off of the private sector. I believe that is called a parasite."

    I dare you to say that to a soldier's face. That's 2.5 million government jobs right there. Call them non-productive if you like, but I for one worked harder in the Army than I did in most of my private sector jobs.

  • Report this Comment On February 16, 2012, at 4:07 PM, thidmark wrote:

    Every company mentioned in this report is underperforming the S&P 500 over the last 12 months.

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