In a recent column in Forbes magazine, Stocks Be Nimble Stocks Be Cheap, Jim Oberweis, President of Oberweis Asset Management, wrote that companies “. . . succeed by anticipating the needs of a changing world. Secular shifts in technology and government regulation, for example, cause uncertainties and disrupt markets. This creates new growth opportunities.”
Investing in Companies That Focus on Changes
Oberweis detailed how appealing the “temporary staffing and outsourced human resources has now become.” That was the focus of profiting from changes in the American workplace. The Forbes article from Oberweis adds to the bullish outlook for the sector and firms such as Paychex (NASDAQ: PAYX), TrueBlue (NYSE: TBI), and Labor SMART (OCTBB: LTNC).
In his article, Oberweis mentions On Assignment (NASDAQ: ASGN) and Barrett Business Services (NASDAQ: BBSI). He notes that each benefit as “. . . many companies are choosing to the meet the recovery in demand by using temps, often called ‘project’ work.” Paychex operates in the same professional services sector of the $100 billion staffing industry as On Assignment and Barret Business Services.
The demand labor segment of the staffing industry is at $29 billion and growing.
That can be seen in the stock price performance of TrueBlue, Inc. and the explosion in revenue for Labor SMART. The share price for TrueBlue, Inc. is up more than 56% for 2013. On a quarterly basis, sales growth and earnings-per-share growth is projected to increase in the double digits. For the next year, the analyst community projects that earnings-per-share will rise by more than 26% for TrueBlue, Inc.
It has been the same story of growth for Labor SMART, too.
Revenues for the third quarter were at a record level. So undervalued is Labor SMART that its third quarter revenues were more than the market capitalization of the stock. The client list too grew for Labor SMART, evincing that the revenue growth is sustainable and robust.
Other Changes Beyond Staffing
The demand for the services of firms in the staffing and outsourcing industry should be robust and sustainable, too. With the Affordable Care Act, or Obamacare, businesses in the United States do not want to hire full-time workers due to the higher costs, as we discussed in How You Can Invest and Profit From Obamacare. A provision of Obamacare mandates that companies with more than 50 employees have to provide workers with health insurance.
That will increase the cost of each full-time worker for a business. Many companies such as The Home Depot (NYSE: HD), Sears Holdings (NASDAQ: SHLD), and IBM (NYSE: IBM) have already acted to reduce expenses in this area, as a result. The future will feature more utilization of the services of staffing companies.
Stocks such as Paychex and TrueBlue, Inc. have done very well, rewarding investors with double-digit returns for 2013.
Investors should expect that firms such as Labor SMART, On Assignment, and Barrett Business Services will continue to grow. While the economy is not growing that much in the United States, the reasons for utilizing the services of staffing industry firms is, especially with Obamacare coming into effect. There should be a similar rise in the stock prices for these companies, as advised by Oberweis.
What other trends do you see in the economy that we can profit from?
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him here and here.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.