Submitted by George Lunga as part of our contributors program.
With fewer Americans filing for unemployment benefits as just reported by the Department of Labor, investor attention should be focused on the demand labor sector. Companies that provide termporary workers and related services such as ManpowerGroup (NYSE: MAN), Robert Half International (NYSE: RHI), Labor SMART (OTCBB: LTNC), Paychex (NASDAQ: PAYX), and TrueBlue (NYSE: TBI) have much to offer to growth, income, and value investors. A $29 billion inudstry that is growing, demand labor firms are well positioned to profit from changes in the United States economy as it recovers from The Great Recession.
A recent article in Forbes by Richard M. Salsman detailed how the part-time component of the American workforce has now increased from 18% to 21%. As Salsman stated in his Forbes piece, “Obamacare Will Foster A Part-Times Jobs Bonanza for our Limp Economy, “…the data show that U.S. firms are, indeed, using relatively more part-time employees ? and more than usual, historically…”
This shift has been reflected in the stock price performance of demand worker stocks.
For income investors, Paychex is up more than 25% for 2013. Paychex also pays a dividend of 3.63%. The average dividend for a member of the Standard & Poor’s 500 Index is around 2%. In addition, Paychex has a history of increasing its dividends.
Growth investors have a choice of companies. Robert Half International, with its lucrative niche in the legal sector, has earnings-per-share growth of more than 44% this year. Labor SMART has increased its revenues and branches many times over in recent years. In terms of internal growth to meet the new demands of the market that will reward investors, Labor SMART just initiated a Corporate Accounts Division.
Undervalued stocks include TrueBlue and ManpowerGroup. For TrueBlue,the price-to-sales ratio is just 0.66. That means that each dollar of sales for TrueBlue is selling at about a one-third discount in the sales price. At 0.25, the price-to-sales ratio for ManpowerGroup is even more compelling for value investors. It is worthy of note that Banjamin Graham, the creator of the value school of investing with Warren Buffett as a loyal follower, would look for stocks that had assets selling at a one-third discount.
The number of Americans filing for unemployment is now at a five-year low.
That comports logically with the share price rise and bullish outlook for Paychex, Labor SMART, TrueBlue, and others in the demand labor sector. More and more employers are looking to hire temporary workers, due to a variety of factors, including the costs of mandated benefits now. That is a trend that will likely rise due to Obamacare, and with that so should the stock prices for Robert Half International, Paychex, Labor SMART, TrueBlue, ManpowerGroup, and others in the demand labor sector.