If any of you know about the art and science of Tao, then you might know about the vital life energy. This energy is the definition of chi. Chi energy is present at the birth of a person, idea, project, etc., and represents the link between the beginnings of plans and our loftiest intentions or goals for these plans.

That's basically how the service industry works. It's the link between goods and lofty intentions. When it comes to the commercial market, the goods are varied and the intention is centered on profits.

We mentioned last week how several food industries marketed themselves as services. We also find services in just about every other sector. These service people/businesses/industries are involved in distribution of goods as sales or rentals. Some services include simple transactions, and others are highly involved in political maneuverings. Some are involved with transferal of information, like Internet Services. Others are concerned with moving people. The latter includes moving them into jobs, in and out of the country, and around lawsuits.

If we take a look at the top ten service sector equities at BUYandHOLD, we'll find a wide variety of industry bedfellows; however, they all have the basic goal of stimulating the marketplace. The government knows this bit of basic information, and likes to share projections and categories with us. Once again, we go back to the North American Industry Classification System (NAICS), but we'll take a focused view through the U.S. Census Bureau.

The Census Bureau 2001 Annual Survey breaks the service sector down in this report. We can view various classifications, survey results, and economic projections for each category. Be aware you're perusing information based on economics from a bygone era. Since this report, we've had numerous problems that could radically alter some financial data.

However, this report is a fantastic base for research into the service sector. There's no mention of specific companies, so we can study the categories to gain insight into this sector's components. We can compare figures in the economic census and we might find subcategories that will tweak our own chi.

Before you look at the Service Annual Survey at the top of the page, scroll down to the 1997 Economic Census. Here, you can browse categories for diversification ideas. If you click on one of the categories, it will take you to a list of service subsectors. If you click on a subsector, it gives you an explanation of that particular industry's focus.

Cora and I realized many service listings didn't contain possibilities for investments. There were other categories that gave us more room to maneuver in our research. Some topics were just great knowledge bytes for conversations with your children.

For instance: Cora and I saw one category under the 812 NAICS code for Personal and Laundry Services labeled "diaper service." Now, this particular service is one of the smallest in this section of the service sector. It's even smaller than dating services. This category sparked a discussion on the future of disposable diapers, and a possible trend back to cloth diapers.

The conversation included the information we already gathered about extraction industries and the manufacturing of non-durable goods. Disposable diapers use plastic, which is a petroleum product. As far as we know, they're not reusable or recyclable, so they're waste products (another service sector potential). If petroleum becomes even more expensive due to scarce resources, will women/families be willing to sacrifice to buy plastic diapers, or will they pay for the services to clean cloth diapers? We decided it would be a fun project to watch this particular sub-sub sector of the service industry to see how things fare over the next couple years.

One advantage we have concerning the service industry is that each business wants to advertise their success stories. This is very valuable information, as service industry businesses like to list their clients. Through these clients we can tell if the service is solid, about to hit a brick wall, or is too specialized or scattered for our tastes.

If you find a company with a focus on just one particular good or service, be careful. The idea of diversification doesn't just apply to our portfolios - it also applies to businesses in the service industry. Specialization is fine, as long as the service offered isn't adversely affected by client behaviors, new innovations, or changes in economy. On the other hand, be aware that many service industries are encapsulated within conglomerates holding products. Sometimes these particular service industries are focused only on moving the conglomerate's goods.

If and when you get to the estimated revenue section of the census site, please remember these figures are based on a survey taken two years ago, and were adjusted on information in an economic census taken almost six years ago. However, this information is useful if we use it to compare current industry figures. Once again, take a look at what BUYandHOLD has to offer in this sector based on your findings. When a company piques your interest, follow the link to their current financial information. The comparisons in the census survey and real-time figures will give you an idea as to how the company is weathering current economic conditions.

The laws of physics play a part in the service sector. Basically, when an object is poised to move, it's in a state of potential energy. When the object begins to move, its energy changes from potential to kinetic energy. What we want in the service industry sector are equities in companies who know how to take potential energy and change it to something that moves - hopefully in an upward fiscal direction. This movement of energy is the ultimate in commercial chi.

Until next week,
Linda Goin