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Investing In A Jobs Recovery
As the unemployment rate remains elevated in the U.S. and abroad, the stocks involved in the staffing and outsourcing sector continue to attract money as their share prices move higher.
IN PICTURES: Top 7 Social Security Myths: Exposed
First time unemployment claims for the week ended September 25, 2010 fell to 453,000 from 469,000 a week earlier, a step in the right direction. The less volatile and more important four-week moving average number fell to 458,000, down from 464,250 and is now at the lowest level since the end of July.
The numbers are beginning to improve, but there is a long way to go before Americans will become happy with the jobs numbers. That being said, investors will begin to buy ahead of the jobs recovery and one sector that will benefit greatly as the situation improves is the staffing and outsourcing companies. This is one major factor for the rally in the sector over the last month.
The Major Players
The world's largest staffing firm, Adecco SA (VTX:ADEN.VX) recently announced that the demand for temporary workers remained upbeat despite worries that the global economic recovery appears fragile. The comments are the opposite of what major U.S.-based player Manpower (NYSE:MAN) said regarding the fourth quarter. In a MAN survey the company showed global employers remain cautious about expanding staff in the fourth quarter.
Even with the less than optimistic news out of MAN, the stock broke out on the last day of September as it rallied to close at the best level in over four months. The stock is trading with a forward P/E ratio of 20.03 and a low price-to-sales of 0.25. The company provides permanent, temporary, and contract recruitment services in the U.S. and abroad.
Robert Half (NYSE:RHI) is a global provider of staffing services as well as risk consulting. The company is well known for its Accountemps division that provides temporary staffing to the accounting and finance industry. The stock is a little more expensive than MAN, trading with a forward P/E ratio of 29.5 and a price-to-sales ratio of 1.26. Technically the stock has yet to break out, however a close above $27 is a bullish signal.
China Play
Of course there is a China-related play for the staffing industry. 51job.com (Nasdaq:JOBS) provides human resources services that range from recruitment to job-related advertising mainly in the Peoples Republic of China. The company was a weekly print publication as well as their website. The stock trades with a forward P/E ratio of 33.39 and a price-to-sales ratio of 7.71 after more than doubling in price through the first nine months of 2010.
Top Performers
Other than JOBS, the two top performers in the sector in 2010 have been Dice Holdings (NYSE:DHX) and Barrett Business Services (Nasdaq:BBSI), gaining 29% and 22%, respectively. DHS operates Dice.com, a website that provides online recruiting and career development services around the globe. The stock trades with a forward P/E ratio of 20.7 and a prices-to-sales ratio of 4.9.
BBSI provides staffing and human resource services to small and medium-sized companies in the U.S., but primarily in California and Oregon. The stock is more of a value play with a forward P/E ratio of 15.5 and a price-to-sales ratio of 0.61.
Counting on Employment Recovery
The action in the staffing and outsourcing stocks has priced in at least a small job recovering in the coming months. If the global economic situation does not keep improving expect this sector to take a big hit as unemployment rises. Proceed with caution and have tight stop-loss orders ready to go. (It's a simple but powerful tool to help you implement your stock-investment strategy. Find out how in The Stop-Loss Order - Make Sure You Use It.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
IN PICTURES: Top 7 Social Security Myths: Exposed
First time unemployment claims for the week ended September 25, 2010 fell to 453,000 from 469,000 a week earlier, a step in the right direction. The less volatile and more important four-week moving average number fell to 458,000, down from 464,250 and is now at the lowest level since the end of July.
The numbers are beginning to improve, but there is a long way to go before Americans will become happy with the jobs numbers. That being said, investors will begin to buy ahead of the jobs recovery and one sector that will benefit greatly as the situation improves is the staffing and outsourcing companies. This is one major factor for the rally in the sector over the last month.
The Major Players
The world's largest staffing firm, Adecco SA (VTX:ADEN.VX) recently announced that the demand for temporary workers remained upbeat despite worries that the global economic recovery appears fragile. The comments are the opposite of what major U.S.-based player Manpower (NYSE:MAN) said regarding the fourth quarter. In a MAN survey the company showed global employers remain cautious about expanding staff in the fourth quarter.
Even with the less than optimistic news out of MAN, the stock broke out on the last day of September as it rallied to close at the best level in over four months. The stock is trading with a forward P/E ratio of 20.03 and a low price-to-sales of 0.25. The company provides permanent, temporary, and contract recruitment services in the U.S. and abroad.
China Play
Of course there is a China-related play for the staffing industry. 51job.com (Nasdaq:JOBS) provides human resources services that range from recruitment to job-related advertising mainly in the Peoples Republic of China. The company was a weekly print publication as well as their website. The stock trades with a forward P/E ratio of 33.39 and a price-to-sales ratio of 7.71 after more than doubling in price through the first nine months of 2010.
Top Performers
Other than JOBS, the two top performers in the sector in 2010 have been Dice Holdings (NYSE:DHX) and Barrett Business Services (Nasdaq:BBSI), gaining 29% and 22%, respectively. DHS operates Dice.com, a website that provides online recruiting and career development services around the globe. The stock trades with a forward P/E ratio of 20.7 and a prices-to-sales ratio of 4.9.
BBSI provides staffing and human resource services to small and medium-sized companies in the U.S., but primarily in California and Oregon. The stock is more of a value play with a forward P/E ratio of 15.5 and a price-to-sales ratio of 0.61.
Counting on Employment Recovery
The action in the staffing and outsourcing stocks has priced in at least a small job recovering in the coming months. If the global economic situation does not keep improving expect this sector to take a big hit as unemployment rises. Proceed with caution and have tight stop-loss orders ready to go. (It's a simple but powerful tool to help you implement your stock-investment strategy. Find out how in The Stop-Loss Order - Make Sure You Use It.)
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
by
Matthew McCall
Matthew McCall is the president of Penn Financial Group, LLC, a registered investment advisor. He also publishes two newsletters, The ETF Bulletin and The PFG Letter as well as other educational material. As a registered investment advisor, he manages clients' investments based on their specific goals and objectives.
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