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Making the Case for Paychex and the Staffing Industry

December 3, 2013 3:32 pm
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"Stocks that go up can keep climbing higher," notes financial columnist Paul La Monica In the "Annual Outlook Issue" of Money magazine.  

That line of thought could explain why Paychex (NASDAQ: PAYX), which is up more than 40 percent for 2013, should have a bullish future. It is also the case for the entire staffing industry, of which Paychex is the largest member.

Robert Half International (NYSE: RHI), TrueBlue (NYSE: TBI), Labor SMART (OTC: LTNC), ManpowerGroup (NYSE: MAN) and others are reporting strong revenue growth and rewarding shareholders. For 2013, ManpowerGroup is up almost 90 percent. It is much the same story with TrueBlue, climbing more than 60 percent this year; with strong earnings growth. Labor SMART again just reported record revenues.

Led by Paychex, these firms should continue to rise due to higher demand.

American companies now demand more of the products and services offered by staffing industry firms. That is why revenue growth has been so strong for Labor SMART, TrueBlue, Robert Half International and others. And that trend should only increase. due to Obamacare, or the Affordable Care Act.

Obamacare mandates businesses with over 50 employees provide those who work more than 30 hours a week with very expensive health insurance. Many firms are hiring temporary workers due to the higher expenses of full-time employees. As detailed in a recent Benzinga article, those hiring practices will increase more as the employer mandate for ObamaCare draws even nearer.

Just because Paychex, Manpower Group, TrueBlue and others have done well is no reason to avoid the stocks.

As La Monica points out, "history shows investing in the prior year's top-returning group beats betting on a rebound among last year's worst performers." With earnings increasing, there is every reason to expect share prices to continue rising for publicly traded companies in the staffing sector.

The costs of Obamacare should make the stocks of Paychex, LaborSmart, TrueBlue, ManpowerGroup, and Robert Half International even more attractive for long term investors.

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