How to Invest in Productivity

The sales/employee ratio should be a good measure of employee productivity. However, it varies considerably across market sectors, much higher in capital-intensive industries such as energy and utilities and much lower in more labor-intensive sectors such as industrials and consumer discretionary. The sales/employee ratio has been most effective as a source of investment return in consumer discretionary, a sector that includes retail, hospitality, autos, and entertainment, which rely on large numbers of employees.

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