With unemployment hovering around 7.2 percent at press time, publicly held temp firms might be on some investors’ radar screen. However, our sources say it might be too early to punch in.
“The temporary employment industry is not immune from the [economic] cycle, and the forecast for the near-term continues to be bleak,” says Tim Grizzle of Georgia Logic, a financial planning firm. “The light at the end of the tunnel is when the economic recovery begins, many of the labor force additions will start as temporary employment,” he says.
Right now, Kelly Services (NASDAQ: KELYA; Price: $11.18), with $115 million in cash on the balance sheet at the end of the third quarter and relatively low debt levels “has the resources to weather the recession and be poised to participate in the growth in employment when the United States emerges from the recession,” Grizzle projects. But near-term, he doesn’t advise that you add it to your portfolio. The same goes for Robert Half International (NYSE: RHI; Price: $19.99). But if you already own it, Grizzle, author of “Creating Wealth in a Turbulent Economy,” thinks that it’s a good long-term bet.
As for Manpower (NYSE: MAN; Price: $30.94), with the majority of its operating profits now coming from its European operations, “The balance sheet is reasonably strong,” with about $845 million in debt and over $600 million in cash, says Steve Laveson, an analyst at Becker Capital Management. “We own shares in Manpower based on our
belief that while this could become a very severe recession, it is unlikely to be comparable to the 1930s depression,” Laveson explains. “The market is down significantly, with pessimism at extremely high levels. At such a juncture and given the depressed price, we believe Manpower will work out well.”