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  • Despite Sequester: Resources Connection Inc. Expects Good Year 0 comments
    Mar 14, 2013 10:09 AM | about stocks: RECN

    With many equity indexes around the world at multi-year highs, there is still an undertone of pessimism lurking in the markets. Central bank dovish policies implemented globally along with a slightly better economy are helping to push equities to new highs. Four and half years after the real estate crash, most retail investors still remain cautious, not trusting of the housing markets' latest rebound and weary about putting money into the stock market. The belief among many market participants on Wall Street is that the growing disconnects between the economy and the stock market eventually will come to a head. Not now, not tomorrow or next month, but years down the road when the adrenaline is extracted from the global economy. Regardless, price is truth. So despite how equities have reached these multi-year highs, folks have to work with what they have.

    With the rally underway, there are two major headwinds; the sequester and issues in the Eurozone. The sequester has happened and the Eurozone, for the most part, is stable. Spain and Italy are still the two countries to watch, as folks are keeping a close eye on the both sovereigns' 10 year yields, which are well below dangerous levels of six or seven percent. Regarding the fear of the sequester, a small correction or consolidation period is expected in the near-term as politicians grapple. Both sides of the aisle are very much entrenched in their positions, with most political analysts not confident an agreement will be reached. The whisper on Capitol Hill is that some are welcoming the sequester, as automatic cuts are necessary considering the mounting debt hindering the country.

    Despite the economy doing slightly better and the stock market roaring, many companies are not hiring and eliminating fixed costs. Outsourcing particular jobs and temporarily hiring consultants have been one way companies are avoiding paying salaries. Companies such as Resources Connection Inc. (NASDAQ: RECN), a professional services firm that specializes in employee compensations and Management Information Systems, provide companies with alternatives. Instead of paying people to manage these systems and bear the cost of an extensive internal department, some companies are looking elsewhere. RECN provides accounting and finance, human resource management and IT professionals to clients on a project-by-project basis.

    One of the company's subsidiaries, RGP Healthcare, announced January the launch of Pavisse, a brand new integrated incident management solution created to help hospitals manage all patient safety, privacy and compliance related incidents. The software system automates the process of reporting potential safety and other incidents to regulatory bodies. This is by far the best software in the market.

    The company's last earnings report was negatively affected by Hurricane Sandy as well as weakness in Europe. The stock is currently trading around $12.78 per share, below its 52-week high of $13.53. With a new and unique software system in place, and demand for the company's services expected to pick up this year, RECN may be a nice play until year-end.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: RECN
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