Invest into the payroll agencies? What about unemployment?

While miserable improvements in the economy haven’t influenced unemployment statistics in any way the reports show that employment market is going to be a profitable for investors. When the business is going up companies usually need to add more workers to its staff. Thus they often look to temporary workers before they commit to full-time hires, says Jim Janesky, an analyst for Stifel Nicolaus.

The 36% increase in stock price of Manpower, the global temporary staffing firm, shows improved confidence in the market. Meantime, a number of analysts think that Manpower's run was premature: The four-week average jobless claims need to stay below 400,000 (the most recent four-week average was 566,000 claims) before staffing stocks can support a sustainable rally, Janesky says.

Nevertheless, the US is not the only source of revenue for Manpower. 80% of profits are coming from abroad with 1/3 coming from France. Janesky thinks the stock, now $46, could double in less than five years.

Analysts think that once the recovery becomes more tangible payroll and other back office services like ADP and Paychex will likely experience ascent. Andy Miedler, senior technology analyst for Edward Jones, notes that both agencies are "very well positioned" over the long term. While both stocks are trading at price/earnings ratios well below their 10-year averages Miedler says, both firms have strong long-term prospects and are attractively valued.

Source: SmartMoney