Wednesday, October 21, 2015

Ride ManpowerGroup as the Nature of Global Workforce Changes

Image result for ManpowerGroup
Many politicians and economists lament the increasing use of temporary labor, seeing it as a disenfranchisement of workers and a threat to the middle class. Temps tend to work for less pay and without benefits or workplace protections.
However, you should seek to profit from trends even if they're not pretty -- and like it or not, the rise of the lower-wage "temp" is now a permanent part of economic reality.

The one stock that's best positioned to benefit from this inexorable transformation of the labor force is ManpowerGroup(MAN - Get Report) , a third-party staffing agency. The stock has been on a tear all year and should continue to outperform into 2016 and beyond. What's more, MAN is a compelling value at current prices.
Image result for ManpowerGroupSpawned by globalization, greater reliance on outsourcing to developing nations, and the pressure of corporate downsizing, increasing numbers of jobs are shifting from permanent to temporary. And temp labor isn't just the province of discount retailers such as Walmart Stores. Major blue chip companies such as General Electric, which have enormous global reach, are making temp labor a common practice.
Temps are in booming demand in both developed and developing countries, as companies strive for labor flexibility during a recovery that's uneven and vulnerable to setbacks.
Uncertainty over the requirements of Obamacare's health insurance coverage also is prompting many companies, particularly smaller ones, to get around the health reform law by resorting to temporary workers. Temps sometimes get health insurance, but usually that expensive benefit is only given to full timers.
The U.S. Bureau of Labor Statistics (BLS) reports that temporary workers currently account for about 70% of the nation's new jobs, compared to about 30% for full-time jobs.
The average duration of employment with a staffing firm currently is about 12 weeks. Temps also tend to work fewer than 35 hours a week, defined by BLS as part-time employment.
Since the Great Recession ended in June 2009, the number of temporary workers in the U.S. has skyrocketed more than 50% to nearly three million, the highest number on record.
MAN Chart MAN data by YCharts 
As a staffing agency, ManpowerGroup is in the sweet spot to benefit from these labor conditions. With a market cap of $6.5 billion and 26,000 employees around the world, Milwaukee-based ManpowerGroup specializes in human resources and IT but fills a wide range of positions.
IT is the granddaddy of outsourced staffing functions and continues to provide ManpowerGroup with huge opportunities for growth, because of the ready ability to reap savings and streamline operations that are digital in nature.
Health care and human resources are additional growth drivers for ManpowerGroup. Obamacare's requirement for more Americans to receive primary care coverage, combined with an aging population, will fuel the need for temporary health care workers, as well as human resources experts who can interpret the massive and complex law.
On October 21, ManpowerGroup released earnings before the market's opening bell that beat expectations, reporting third-quarter fiscal 2015 earnings of $123.9 million, for earnings per share (EPS) of $1.61. Adjusted for non-recurring costs, EPS hit $1.86. The results topped Wall Street's consensus forecast of $1.55.
Manpower shares have risen nearly 30% year to date; the stock has soared 42% over the last 12 months, with plenty of upside left. If you're looking to profit from an unstoppable trend that affects millions of workers around the world, this stock does the job.
Looking for other bargain-priced, often ignored plays on the globalization of the economy? Click here for a free list of hot stocks that any value investor should love.

 

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