Recruitment firms attract short selling

With so much focus on the job market, it makes sense to look at how investors are allocating their chips at the recruitment focused companies. Last Friday’s news that the US did not add any new jobs to their economy in August has depressed some commentators and comes as the market continues to sell off. Demand to borrow the sector is 1.9% of the total shares and while this is not especially high, it has increased by 51% over the past month. By contrast, funds who lend have only reduced their holdings by 1.3%. With many believing the sector to be a plausible barometer of business confidence, this investor sentiment is not a good omen for those looking for growth. The other factors at play are the type of recruitment on offer in today’s markets along with the changes brought about by social media and the internet. We will look at Michael Page (LSE:MPI), AMN Healthcare Services (NYSE:AHS), Monster Worldwide (NYSE:MWW), LinkedIn (NYSE:LNKD).

Recruitment companies are fully capable of withstanding low growth economic environments but the banking industry remains a large driver of profitability. UK listed Michael Page reported pretty amazing first half results for 2011 but did say that their banking business still accounted for 10% of group profit. With job cuts reported across the sector and hiring freeze announcements from the banks, does this explain why short selling is so high at just under 8%?

US Listed Monster Worldwide is less reliant on the banking industry and seems, from a look at their website, to make aggressive use of new media to fill jobs. Short selling remains high at 7% of shares (the S&P 500 Index average is 3%) but this is a 2 year low.

AMN Healthcare Services is a small cap company who place temporary staff in US hospitals. Their shares are down 21% year to date and short sellers think they have further to fall with demand to borrow at an annual high of nearly 9% of the company.

Finally, LinkedIn is not a recruitment firm but does provide a tool to help people find jobs online. As such, it could see greater activity from its members during tough economic times that could, perhaps, translate into greater hits and therefore advertising dollars. Short selling is high at 17% of the shares outstanding (according to Bloomberg’s methodology) but lower than what it was in the early summer. With a P/E ratio of nearly 900 it needs to perform outstanding well to prevent the short sellers from making money.