Robert Half International (RHI-N)

This is staffing. It has been frustrating. The thesis was that the economy is in this Goldilocks scenario, where people don’t want to commit to full-time employees, but need to get stuff done and grow the business. They’ll go to this company for temporary workers. As things get stronger, you get a conversion to permanent staff, and this company makes a nice commission. Historically this hasn’t been playing out as it used to, which has raised a lot of concerns for investors. It doesn’t seem like the game has changed or that there is something structural going on. There is interest on both sides, but are just having trouble getting the deal done. This is cyclical and there are a lot of concerns in the market about the economy. She is going to stay with it.

When she talks about owning a stock going through a cycle, this is a great example of that. She bought this at 8% revenue growth and an attractive valuation. Sometimes, with value investing, you get an attractive valuation that keeps getting more attractive, and thinks that’s where she is with this one. The cycle looks very different on a number of metrics. The growth that was supposed to be there from the amount of stimulus in the economy, just hasn’t been there. They went through a period where there was a bunch of cautions on whether people were committing to the hiring of some longer lead times. Their clients, who are employers, perhaps didn’t commit as quickly as they would, so this caused some slowing of revenue growth. However, this last quarter seems like it is turning around. They are having more conversations soon pulling the trigger on some of their hirings, which should be beneficial.

(Top Pick Feb 19/16, Up 30.85%) It got hit pretty hard last year. The market was pricing in a recession that didn’t happen. It had a great recovery. They have an 8% cash flow yield. She thinks we will see a much higher share price going forward.

(A Top Pick Aug 13/15. Down 33.39%.) This does recruiting, and is really focused on the smaller side of professional services. She really likes the story, because a lot of the thematic plays in a portfolio, is that of specialization, allowing companies to focus on things that they are good at. They’ve had very good growth rates, but the market to some degree is already pricing in a downturn and recession.

(A Top Pick Aug 13/15. Down 26.49%.) Provides staffing services, to mostly middle size companies in the professional space. Has been her most frustrating position by far. Nothing bad is actually happening, and in fact results still look very good, but it is the fear of an expectation of a recession, and how the earnings will look in that sort of environment. This still has a very strong growth rate for the type of economy that we are currently in. She would have had this as a Top Pick but had it the last time she was on.

A temporary & permanent staffing company focused on providing high skilled labour. Thinks it sold off because it is considered economically sensitive. Their revenue growth is still good, and growing at 6%+. Dividend yield of 2.28%.

Focused on professional services. Started out in finance and accounting, and have a technology arm going into risk management audit. Have a consulting business that is doing very, very well too. There is a dislocation in US unemployment, on jobs that need to be filled but are lacking the skill sets, and this company has been doing very well as they have seen wages come up in areas they focus on. There is still a lot of demand growth. Growing their top line in double digits. Still on their margins below prior peak in their businesses. Thinks there is quite a bit of demand. They are in the sweet spot where there is the demand, but the economy is still not at the point where people are willing to commit to full-time employees, and that fits well for this company. Dividend yield of 1.41%.

(A Top Pick Feb 19/14. Up 56.14%.) The biggest staffing company in terms of accounting and IT personnel. About 75% of their revenues are tied to the US market, so as the US labour market improves, this really benefits. He could see another 10% upside.

Likes this one for the US economic recovery story, but also because with this one, he can increase a little bit of beta for his portfolio. One of the premier brands in the temporary/flexible staffing business. Within the last few years, they have invested quite substantially in their Protiviti (?) business, which involves internal audit as well as risk consulting. This is starting to show expanding margins. Yield of 1.76%. A very reasonable target would be $48.