As it does every month, the U.S. Bureau of Labor Statistics released the latest jobs report for May. While the unemployment rate held steady at 7.6%, there is good news in hiring within certain sectors of the economy. Service stocks in particular have been hiring more employees, which suggests that companies in this category may be seeing strong numbers on their overall balance sheets.
With this in mind, we decided to look for more stocks in the service sector that present good investment opportunities. We ran a screen for those stocks that have outperformed significantly over the last quarter, with over a 50% return.
For additional confidence, we next looked at bullish sentiment from institutional investors, with significant net institutional purchases over the last quarter representing at least 5% of share float. This indicates that institutional investors such as hedge fund managers and mutual fund managers expect these names to bring in solid returns going forward.
Among the results that remained, we decided to focus only the small cap companies, of which there were three. Small cap stocks often get lost in the wake of their bigger, better known competitors, and investors looking for low-value companies with lots of room for growth would do well to consider more of these names.
For an interactive version of this chart, click on the image below. One year returns sourced from Zacks Investment Research.
Do you think these stocks will use their cash on hand to continue to outperform? Use the list below as a starting point for your own analysis.
1. Nexstar Broadcasting Group Inc. (NXST): A television broadcasting and digital media company that engages in the acquisition, development, and operation of television stations and interactive community Websites in medium-sized markets in the United States.
Market cap at $830.01M, most recent closing price at $28.27
Performance over the last quarter: 67.87%
Net institutional purchases in the current quarter at 5.1M shares, which represents about 22.81% of the company's float of 22.36M shares. The top holders of the stock are FMR LLC (6.64%) and Silver Point Capital, LP (5.22%).
NXST has recorded great gains over the last month, when compared to its closest competitors. The stock returned 6.20% since 5/7/13, better than Belo Corp. (BLC) and CBS Corporation (CBS), which returned 0.90% and 2.76%, respectively, during the same holding period.
Insider Monkey considers the company a solid investment based on the attitudes of hedge funds. Some of the top tier institutional investors followed by the site have initiated recent positions in NXST, including Scopus Asset Management ($12.4M as of Q1 2013) and Act II Capital ($11M in Q1 2013).
2. Orbitz Worldwide, Inc. (OWW): Operates as an online travel company worldwide, providing services including air travel, hotels, vacation packages, car rentals, cruises, travel insurance and destination information.
Market cap at $806.69M, most recent closing price at $7.65
Performance over the last quarter: 53.00%
Net institutional purchases in the current quarter at 4.6M shares, which represents about 6.3% of the company's float of 72.98M shares. The top holders of the stock are Blackstone Group LP (52.20%) and PAR Capital Management, Inc. (23.33%).
OWW has recorded great gains over the last month, when compared to its closest competitors. The stock returned 23.79% since 5/7/13, better than priceline.com Incorporated (PCLN) and TripAdvisor Inc. (TRIP), which returned 11.15% and 12.76%, respectively, during the same holding period.
OWW recently extended its partnership with SilverRail Technologies, which developed the first global rail distribution platform. The two companies offer online rail search and booking options, catered especially to business travelers, through the OWW subsidiary Orbitz for Business interface.
3. Boyd Gaming Corp. (BYD): Operates as a multi-jurisdictional gaming company in the United States. Owns and operates 21 gaming entertainment properties in Nevada, Illinois, Louisiana, Mississippi, Indiana, Kansas, Iowa, and New Jersey.
Market cap at $1.05B, most recent closing price at $12.01
Performance over the last quarter: 72.81%
Net institutional purchases in the current quarter at 5.8M shares, which represents about 12.23% of the company's float of 47.43M shares. The top holders of the stock are PAR Capital Management, Inc. (9.47%) and H Partners Management, LLC (4.39%).
BYD has performed poorly since 5/7/13, but this is not far off from industry peers. The stock returned -7.47% over the last month, compared to Penn National Gaming Inc. (PENN), Pinnacle Entertainment Inc. (PNK) and MGM Resorts International (MGM), which returned -5.99%, 4.57% and -0.88%, respectively, during the same time period.
The company is actively diversifying its gaming venues, hoping to be a leader in online gaming in the U.S.. BYD has entered in a partnership with bwin.party digital entertainment plc, the European online gambling titan, which is currently seeking approval from regulators to obtain a license for gaming in Nevada.
*Institutional data sourced from Fidelity, all other data sourced from Finviz.