With unemployment at 50-year lows, it is not surprising that employment and personnel services are seeing strong demand. In our annual MoneyShow Top Picks 2020 report, several leading advisors look to this market niche, including three experts that chose the same stock.

Jason Williams, Wealth Daily

BG Staffing (BGSF) is a top pick for conservative investors; it is part of an industry that I see growing for the next few decades — at least. Temporary and contract positions in the U.S. workforce are expected to grow 23% faster than full-time positions for the next five years. And a trend is developing that will extend that growth, potentially forever.

More businesses are turning to staffing companies to supply the talent they need to drive their businesses forward. And more and more employees are looking to contract work, too. Companies like the flexibility that temporary staff offers. They’re easy to hire and easy to fire. And when you’re not sure what the future holds, that’s a major benefit to hiring managers.

Get access to MoneyShow’s 100+ page Top Picks Report featuring the nation’s most respected and well-known newsletter advisors favorite investment ideas for 2020.

We’re also getting close to full employment. And that makes it harder for companies to find top talent to fill their positions. And surprisingly, workers like the flexibility, too. They can often do the job from anywhere and work on their own time.

There are over 20,000 staffing companies in the U.S. But there are only one or two that operate nationwide and have the expertise and the deep talent pool major companies will be looking for.

And that’s a big part of why I like BG Staffing so much. Staffing companies get hit harder than most at the onset of a recession. And the stock has been getting beaten down as if we’re already in one. But pretty much all other signs point to a continued economic expansion.

Another strong point for BGSF is the type of employee the company provides. Not only does it help companies find laborers for light industrial work and technical employees for more skilled tasks (think IT and accounting), but it also helps fill the offices of apartment buildings and residential communities across the country.

If I’m right and we’re not heading for recession in 2020, then you’ve got the potential for at least 30% to 40% growth. And let’s not forget that juicy (and well-covered) 6% dividend, too. This is definitely a stock you can buy and hold for a long time.

Doug Gerlach, Investor Advisory Service

An increasingly complex legal and regulatory environment makes it difficult for small- and medium-sized businesses to provide the range of employee benefits needed to attract and retain talented staff

In response, a type of service business called a Professional Employer Organization (PEO) has emerged to provide outsourced employee benefits and solutions. Insperity, Inc. (NSP) was founded in 1986 and has grown to over $4 billion in sales. The company started by focusing on basic PEO services like payroll processing and government compliance.

Over the years Insperity has expanded its services to include a wide variety of human resources and employment functions, including health benefits, 401(k) plans, employee recruiting, performance management, training, and compensation guidance.

Insperity thrives with small firms, generating about three-quarters of its sales from businesses with fewer than 100 employees. In this segment the company can price its services as a percent of the employees’ compensation rather than a flat dollar amount per employee.

Insperity continues to grow its co-employment model which essentially takes full ownership of a customer’s employees, handling everything from hiring to termination. Employers are growing more comfortable with this model and Insperity earns higher profit margins.

Insperity’s second and third quarters saw slowdowns in sales and signing of new business, and a spike in employee healthcare claims. The share dropped by a third, as two straight quarters of surprisingly poor performance stunned investors who had come to expect strong and consistent growth from Insperity.

Management subsequently expressed confidence that it had trained enough new sales representatives heading into the critical fourth quarter selling season, and determined that the excess healthcare claims costs it experienced are not expected to repeat.

While aware of the risks, the recent price of $80 represents a fairly cheap P/E of 19. With our long-term EPS growth expectation at 13.0%, we see NSP as a buy up to $92, with the potential for an annual total return of better than 21% through 2024.

Eddy Elfenbein, Growth Stock Advisor

The job at Paycom Software (PAYC) is to make human-resources departments more manageable — and this isn’t so easy in the modern business climate. HR departments have to deal with lots of government regulations, on top of needs specific to their industries.

The company makes and sells software that lets companies easily hire, manage, train, and most importantly, pay their employees.

Consider the process of finding a new employee. This is a major decision for any young company. Paycom can help with every step of the process. That includes tracking interviews and background checks.

Once a new employee joins up, there’s more paperwork to deal with. The employee has to make decisions regarding health insurance and retirement savings. Its software helps manage sick and vacation days, as well as keeping track of training.

Get access to MoneyShow’s 100+ page Top Picks Report featuring the nation’s most respected and well-known newsletter advisors favorite investment ideas for 2020.

Paycom provides functionality and data analytics that businesses need to manage the complete employment lifecycle, from recruitment to retirement. Employees at customer firms love Paycom’s ease of use.

Their software lets employees manage their own HR needs in the cloud, which reduces the administrative burden on employers and increases employee productivity. I’ll caution you that Paycom is not a value stock, but its growth potential is very strong.

Jim Woods, Successful Investing

Paycom Software (PAYC) offers a full suite of web-delivered software that includes features such as talent acquisition, time and labor management, payroll, talent management, and HR management.

These are the tasks that companies dislike dealing with, and that always represents a big cost to the bottom line. But now that there are cloud-based software solutions to these tasks, provided here by Paycom, companies are largely liberated from the time suck of time sheets, scheduling vacations, payroll, etc.

The stock shined brightly in 2019, more than doubling its value. Yet despite that big gain, I suspect much more to come from PAYC. One big reason why is that in 2020, I suspect that companies are going to increase their capital spending.

Now that the trade tensions between the United States and China have calmed significantly, and now that the Fed has basically told us that there is very little likelihood of any interest rate hikes in the year ahead.

In that environment, companies can invest in the future with a lot more certainty than they had in 2019. That investment will, I suspect, include the embracing of HR solutions such as those offered by Paycom.

Todd Shaver, BullMarket Report

Paycom Software (PAYC) has been a secret weapon for investors for years. There aren’t a lot of sizzling Silicon Valley buzzwords here. The company automates payroll and other human resources functions. 

It’s a stable and profoundly sticky business. Once people convert their systems, they rarely go back . . . retention last year was well above 90%, which liberates the sales team to chase new accounts instead of keeping existing clients happy.

That’s translated to roughly 30% annualized revenue growth over the years and healthy margins throughout the client cycle. We initially recommended PAYC in early 2018 at $111 so you can see how far it’s come. However, as long as there are new employers left to capture, that growth curve will continue. And the market opportunity is endless.

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