Special Report: The Top 4 Stocks to Play During a Labor Shortage

If there is a silver lining to the economic fallout from the COVID-19 pandemic, it is its effect on wages. 

For the first time in American history, generous unemployment benefits are allowing millions of workers to choose not to work. And those who do choose to work are demanding better pay and conditions than ever. 

Many employers are listening to those demands. In June, almost 20% of jobs posted on job search site ZipRecruiter offered signing bonuses, compared with just 2% in March. These incentives were once uncommon outside of high finance and major-league sports, but today a variety of working-class employers including Burger King and Pilgrim's Pride are offering them. 

The one downside of this phenomenon is that even with these incentives, many businesses are still struggling to hire enough workers. In July, the National Federation of Independent Business (NFIB) said that 46% of small-business owners reported job openings they could not fill — more than double the historical average of 22%. 

Can Small Business Hire Enough Workers

Source: https://www.nfib.com/content/press-release/economy/small-businesses-continue-to-struggle-finding-workers/ 

There is, however, an entire industry whose sole purpose is to solve these kinds of problems — and it has an exciting growth trajectory in the years ahead. 

Several companies in this industry are publicly traded — and several of those look tantalizingly undervalued based on their current fundamentals… 

A Good Time to Be in the Recruiting Business 

Given the lengths employers are going today to try to attract workers, it's no wonder that many are outsourcing the process to recruiting firms. 

The typical recruiting firm charges a fee of between 15% and 20% of a role's first-year salary to fill it, while some boutique firms can charge as much as 35% Based on the U.S.' individual median income, that works out to between $4,500 and $10,000 for a typical job. Those rates are trending upward, as implied by this industry-internal infographic from DG Recruit. 

Recruitment Rates

Source: https://www.linkedin.com/pulse/what-should-recruitment-agencies-charge-services-dandan-zhu/ 

That might sound steep, but compared with the costs of advertising for workers, pulling managers off the job to conduct interviews, offering bonuses, and onboarding, many companies consider it a compelling alternative to doing their own hiring. 

After all, 76% of hiring staff say that attracting quality candidates is their biggest challenge, according to CMD Recruitment, and to that end, 41% work with recruiters on mobility strategies for outside talent, according to FinancesOnline.

With this in mind, it's no surprise that Fortune Business Insights expects the online recruiting industry to grow to $43.4 billion at a 7.1% compound annual growth rate (CAGR) through 2027. 

But the recruiting industry is relatively concentrated — just 100 firms brought in $224 billion in 2019 and accounted for more than 45% of global revenue, according to Staffing Industry Analysts. 

And a handful of publicly traded companies can provide investors with especially profitable exposure to the fast-growing industry… 

Korn Ferry (NYSE: KFY)

Founded in 1969 and based in Los Angeles, Korn Ferry is the largest recruitment firm in the world. It operates in 55 countries through four segments: Consulting, Digital, Executive Search, and RPO and Professional Search.

In the most recent quarter, Korn Ferry grew its revenue by 26% year over year. It has remained profitable on an earnings basis through the worst of the COVID-19 pandemic. 

Korn Ferry International KFY Chart

It also has a comfortable debt-to-equity ratio of 44% and pays a 0.58% dividend at a payout ratio of just 19.1%. It’s no wonder shares have surged over the last year, but they should still have more room to run. 

Cross Country Healthcare (NASDAQ: CCRN)

Founded in 1986 and based in Boca Raton, Florida, Cross Country Healthcare is a specialized staffing and recruiting firm serving the healthcare industry, which had one of the fastest-growing labor markets in the U.S. before the pandemic and is even more starved for workers after. 

Cross Country has grown its quarterly revenue by 56.7% year over year. It too has remained profitable on an earnings basis through the pandemic. 

Cross Country healthcare CCRN Chart

And the company’s forward price-to-earnings (P/E) ratio is more than 80% lower than its current P/E ratio, suggesting that the market sees strong earnings growth in its future. 

With that in mind, it’s easy to see why shares have soared over the last year. But a recent pullback provides a perfect entry point. 

Heidrick & Struggles International (NASDAQ: HSII)

Founded in 1953 and based in Chicago, Heidrick & Struggles is one of the world’s oldest and most prestigious executive search firms. It has more than 50 offices across six continents. 

In its most recent quarter, Heidrick & Struggles grew earnings per share (EPS) by 71.2% on just a 12.9% increase in revenue. 

Heidrick & Struggles HSII Chart

The company has a healthily low debt-to-equity ratio of 39% and pays a 1.42% dividend. Investors should consider buying the recent dip pictured above because shares have plenty of room to run from here. 


Founded in 2007 and based in Plano, Texas, BGSF is one of the largest temporary staffing firms in the U.S. Its current business covers short-term staffing needs for commercial employers like restaurants and retail businesses, whose workforces were some of the hardest hit by pandemic layoffs and employees quitting. 

The company has maintained profitability through the COVID-19 recession, and its forward P/E is more than 90% lower than its current P/E, suggesting massive earnings growth ahead. 

BG Staffing BGSF Chart

The company also pays a 3% dividend. It’s no wonder shares have skyrocketed over the last year, although a sell-off in the spring has given investors a great opportunity to buy in for cheap before they recover. 

Outsider Club's Recruiting Stocks Watch List: Korn Ferry (NYSE: KFY), Cross Country Healthcare (NASDAQ: CCRN), Heidrick & Struggles International (NASDAQ: HSII), and BGSF (NYSE: BGSF)

The COVID-19 pandemic may be coming to an end, but that doesn’t mean the tightness in the labor market is too. Job numbers are still not quite back to their pre-pandemic peaks, and economists expect labor shortages in many industries to last well into next year. 

With all this in mind, the four stocks in the watch list above can give you an easy way to profit from this rapid economic recovery.

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