05/07/2004 12:00 am EST


Jim Jubak

Founder and Editor,

"Finally, the economy is adding jobs at a decent pace; this is great news for the stocks of companies that recruit workers for other companies," says Jim Jubak, in his Jubak’s Journal. Here, the leading financial advisor offers "five stocks juiced by job growth."

"This good news on jobs may actually be good enough to start the kind of positive feedback loop that’s essential if an economic recovery is to become self-sustaining. Here are companies that help other companies find employees:

"Robert Half International (RHI NYSE) provides high-end full-time and temporary workers to middle-market customers. It recruits skilled professionals in areas like accounting and law for smaller firms that tend to be a bit less price sensitive. In 2002, Robert Half bought the Protiviti internal audit business of scandal-plagued accounting giant Arthur Andersen. Start-up costs have cut into recent profits, but long-term this business should be a solid addition for Half. Wall Street is expecting a return to profitability in a big way in 2004 with earnings per share projected to rise to 40 cents a share from 4 cents in 2003.

"Administaff (ASF NYSE) workers provide services that include benefit management, employment administration, liability management, worker recruiting and training, and performance management. It basically makes up a complete offsite human resources department for 4,500 small and midsize businesses. But it’s the upside leverage in its model that’s attractive to investors now. As client companies add workers, Administraff reaps greater revenues from its existing client base. The stock now looks ready to move up on recent numbers.

"Labor Ready (LRW NYSE) operates at the other end of the labor market from Robert Half. It provides temporary workers for manual jobs in transportation, warehousing, light manufacturing, and construction sectors, among others. These are the sectors that will see the biggest jump in hiring, as manufacturing picks up. The slow economy walloped earnings in 2003, even producing a first quarter 2003 loss of 8 cents a share. In this year's first quarter, the company reported a 2 cents a share profit, indicating that the trend has indeed changed. Wall Street projects earnings of 54 cents a share in 2004 and 72 cents in 2005.

"Gevity HR (GVHR NASDAQ), like Administaff, offers small and midsize businesses all the services of an in-house human resources department. With Gevity the big question is how many of the clients it acquired when it bought EPIX and TeamStaff will it keep? Gevity served 51% more client workers in 2003, but all but 2% of that growth came from acquisitions. If Gevity can manage this challenge, the stock is relatively cheap. It recently traded at 27 times projected 2004 earnings and 20 times projected 2005 earnings.

"Manpower (MAN NYSE), one of the most recognized names in the temporary worker market, used the recent economic downturn to improve its gross margins by acquiring businesses with higher margins and investing in internal businesses with that potential. This should pay off in a big improvement in the company’s historically low gross margins as the economy recovers. That improvement may already be showing up. The stock recently traded at 22 times projected 2004 earnings per share and 17 times 2005 projections."

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