4. Korn Ferry (NYSE: KFY)
Number of Hedge Fund Holders: 17
Korn Ferry (NYSE: KFY) is a California-based management consulting firm founded in 1969. It is placed fourth on our list of 10 best staffing company stocks to buy. It has operations in more than 53 countries and employs more than 8,000 people. The firm provides executive level talent as well as mid-tier management solutions. It also has a leadership development program. Korn stock has returned more than 134% to investors over the past year. The firm primarily serves middle market and emerging growth companies.
Korn Ferry (NYSE: KFY) posted earnings for the third fiscal quarter on February 22, reporting a revenue of $477 million, beating market estimates by more than $54 million but down more than 9% compared to the same period last year.
At the end of the fourth quarter of 2020, 17 hedge funds in the database of Insider Monkey held stakes worth $196 million in the firm, down from 21 in the preceding quarter worth $156 million.
In its Q3 2020 investor letter, Third Avenue Management, an asset management firm, highlighted a few stocks and Korn Ferry (NYSE: KFY) was one of them. Here is what the fund said:
“Korn Ferry – Korn Ferry is a company that has historically been known for its market leading position in the executive search industry. This business entails highly sophisticated searches for senior roles at a wide variety of corporations and other organizations. Typical assignments might include the identification and recruitment of CEOs, CFOs or board members. This is a high margin and very lucrative practice for successful companies in this industry. However, Korn Ferry, mostly through a series of acquisitions over a number years, has expanded and diversified its lines of business to include other competencies, such as consulting roles to guide the planning of corporate workforces, the recruitment of large-scale, non C-suite workforces and a variety of educational and training consultations. Korn Ferry has also made strides building a digital business that is capable of monetizing Korn Ferry’s proprietary data, which is one of the world’s most substantial databases of employment and compensation information. The company is run by one of the industry’s most respected CEOs, who has been responsible for the company’s acquisition and diversification strategy and is also substantially aligned with shareholders via a large personal interest in the stock.
Korn Ferry’s issues today appear entirely exogenous to the company and are primarily a function of the COVID-related shutdown. Not surprisingly this has caused a reduction in new business generation for the company, which we believe to be temporary. We view the company to be quite cheap as measured by its valuation relative to any estimate of normalized profit. Furthermore, the combination of a very strong balance sheet and a highly flexible cost structure put the company in a position to endure long bouts of depressed operating conditions, if necessary. We do suspect though that there are several underappreciated factors that may drive a more rapid business recovery than some seem to expect. First, it would not be surprising to see an acceleration of C-suite and board member turnover as companies emerge from the pandemic and adjust previous plans. Similarly, the COVID experience has accelerated a number of pre-existing trends whereby a variety of large-employment industries may not be in a position to re-hire their former workforces for some time while other large-employment industries are finding themselves needing to expand workforces rapidly. Last but not least, Korn Ferry is one of the companies on the front lines of helping companies accomplish their diversity and inclusion goals. Korn Ferry’s employee education and training functions support corporate culture as it relates to diversity and inclusion and the company’s executive search functions are increasingly being called upon to help make boards and c-suites more diverse. It is our sense that this incremental source of demand is lasting and more substantial than may be appreciated today.”
