Job Market Stocks Poised to Soar Once the Back to Work Order is Cleared
Insider Financial
By Chris Sandburg
May 15, 2020
The jobs numbers were the catastrophe everybody was expecting. The period between the second week of March and the second week of April — was the worst month for American workers at least since the Great Depression and possibly in the history of our great nation. With the abundance of qualified individuals who are out of work, it appears that employment service-related companies are geared to take advantage of this once in a century opportunity.
With the potential for much of the economy to reopen in the coming months, at least some portion of America’s laid-off workers will likely be called back to work. Yet layoffs could also rise again if state and local governments are forced to reduce their staffing or if a second wave of infections forces another round of shutdowns later this year.
Against that backdrop, what is the state of America’s job market, and what PubCo’s will benefit moving forward? Here are some questions and answers:
WHAT DOES THE DECLINE IN JOBLESS CLAIMS SIGNIFY?
Last week, 3.2 million people sought unemployment aid, down from all-time high of 6.9 million at the end of March. The new record level that was set in March was 10 times the previous high. Some economists see the decline in applications for unemployment aid as a sign that the job market may at least be bottoming out. With state wallets burning through funds to keep an influx of capital to their unemployed residents, a push for getting these individuals back to work and seeking employment will be their first priority even though most states Department of Labor (DOL) state on the weekly qualification for unemployment benefits, they do NOT need to seek work (usually 3 inquiries a week) due to COVID-19 and most states are still on one form of lockdown restrictions or another.
After the return to work order comes, people with gravitate toward employment platforms like the Indeed.com’s, CareerBuilder.com’s (majority owned by Apollo Global Management (NYSE: APO), Monster.com’s and growing social media platform LinkedIn.com (acquired by Microsoft (NASDAQ: MSFT) in Dec of 2016 for $26.2 Billion) to assist in getting out their resume and finding work. We will call this Phase 1 of recovery on the employment front.
UTILIZING STAFFING AGENCIES AS WE ALL GO BACK, A QUICK FIX?
As states “reopen” amid historically high unemployment, agencies devoted to helping people find jobs are still operating, often remotely. Many are continuing to counsel clients and help with job placements. Staffing agencies are also meeting with job seekers on an as-needed, appointment only basis.
Companies we found in this space include UpWork Inc. (NASDAQ: UPWK), Robert Half Int. (NYSE: RHI), Insperity Inc. (NYSE: NSP), HireQuest (NASDAQ: HQI) and Korn Ferry (NYSE: KFY). All of these companies have already seen around a 100% price increase since the bubble pop in mid-March.
UpWork was as low as $5.43/share on March 18, 2020 and as of Wednesday May 13, it was trading at $13.48/share (+148% last 7 weeks) — Very Impressive. The others have bounced significantly also, but still have quite a gap to fill before they reach their February of this year’s highs. An example: Robert Half was as high as $60/shares in late Feb., fell as low as $32.75 on March 23rd and now back in the $46 range. Insperity, a similar chart, was trading in the low $70’s in February, as low as $22.29 March 18th, has roared back to $50+ a share. Korn Ferry followed suit trading in the $42 range in February, as low as $21.60 March 23rd, and at $27+ now. As well as these companies have corrected, increased demand in the 2nd half of 2020 could result in testing those February 2020 highs in the near future.
Job Recruiter
EMPLOYMENT REBOOT, DON’T FORGET TO RECRUIT?
Job recruiters and recruiting websites and platforms are another layer of the job market sector that should see potentially an overwhelming boost. Companies like Recruiter.com (OTCMKTS: RCRT), Recruit Holdings Co., Ltd. (OTCMKTS: RCRRF) and other agencies will be busy in the later part of this year.
Recruitment is a positive process of searching for prospective employees and stimulating them to apply for the jobs in the organization, also known as head hunting.
Recruiter.com, an online global recruiting service that offers an industry-leading job market technology platform has a highly engaged membership base, and also works with hundreds of clients and employers. On March 19th, the company’s stock was at a low of $1.20 but has since found its way back to $2.50/share today.
Background Checks
HR MANAGERS READY FOR SCREENING, ONBOARDING AND BACKGROUND CHECKS?
Now that employers have found their candidates from the pool, the next phase will begin — Getting these future employees into the system, but not with proper screening, background checking and eventual onboarding.
Intel365 CEO Crispin Cruz commented,
“When Hiring Managers call, we are going to pick up, treat them as if they are our top enterprise clients and assign them a representative for their account.”
Onboarding and TAT (TurnAround Time) seems to be the hyper focus of Human Resource managers at the moment. When it comes to screening and background checks, the expectations are a 24-48 turnaround time. Having access to data, insights, and best practices pertaining to an array of areas affecting today’s workplace environments is key including contingent worker screening, identity verification, drug screening, continuous monitoring, and social media checks.
Intel365, recently acquired by Xalles Holdings (OTCMKTS: XALL), finds themselves competing for their slice of the pie in the market sector where majority share for screenings are taken by companies such as HireRight (merged with GIS in 2018), First Advantage (to be acquired by Silver Lake for $1.5 billion) and SterlingCheck.com (officially Sterling Infosystems Inc).
Some of the larger players have seemed to lose that personal touch and shift focus more on keeping their enterprise accounts happy. Along with failure to appeal to the small business, some have found themselves in hot water in the past with compliance issues. HireRight was the subject of a number of class-action and Fair Credit Reporting Act (FCRA) lawsuits. In 2011 the company paid $28 million to plaintiffs who accused HireRight of failing to provide copies of reports to job applicants and failing to resolve disputes. Background-check company Sterling Infosystems Inc. also had to pay $8.5 million and make policy changes to resolve a Consumer Financial Protection Bureau lawsuit accusing it of violating the rights of roughly 7,100 job seekers. First Advantage is dealing with a similar class action in motion where more information can be found here.
“We have yet to be fined, and still give that personal touch”, added Intel365’s Cruz. “Being client centric is our mission with Human Resource managers as they require candidates to move fluidly through the process. When running a screen, only about 10% come back with issues. Unfortunately, by time these checks come back, the candidate has already gone through multiple interviews expelling valuable time and resources, although it’s less cost effective for employers to do these checks prior to interviewing.”
INVESTMENT SUMMARY
As you can see, many of these companies have seen dramatic rebounds, as almost all stocks, since the initial March meltdown, but if you are looking for speculative growth, the job market sector looks like a good one as the need for their services will be in demand as the country recovers. Many companies are still much lower than their February highs and can bring healthy returns if and when they reach that milestone again. Smaller companies like Xalles’ have positioned themselves with smart timely acquisitions like Intel365 who are estimated to generate $500,000 in revenue this year and quadruple that to $2,000,000 in 2021 according to recent press.
If layoffs, furloughs and unemployment were not enough, adding to the mix are all the college students shifting to the workforce rather than drowning themselves in student debt. With many universities already notifying students that classes will be done via Zoom classroom (NASDAQ: ZM), they are finding it exceedingly difficult to justify spending tens of thousands of dollars on streaming classes.
