Larry Robbins Sees Even More Upside Potential In ManpowerGroup Inc. (MAN)

In a move that increased the exposure of Larry RobbinsGlenview Capital to the industrials sector, the fund hiked its stake in the $7.15 billion provider of workforce solutions, ManpowerGroup Inc. (NYSE:MAN), by almost 150% according to a recent 13G form filed with the Securities and Exchange Commission. The current holding amounts to 5.67 million shares and has a value of $520.22 million, according to the stock price at the time of publication. It represents about 7.24% of the company’s outstanding stock.

GLENVIEW CAPITAL

Before establishing Glenview Capital in 2001, Larry Robbins worked for veteran investor Leon Cooperman’s Omega Advisors. The market value of Robbins’ fund’s public equity portfolio stood at $21.90 billion at the end of March, with 36% of the value of its holdings in the healthcare sector.

Larry Robbins
Larry Robbins
Glenview Capital

But why do we track the hedge fund activities? From one point of view you could argue that hedge funds are consistently under-performing when it comes to net returns over the last three years when compared to the S&P 500. But that doesn’t mean that we should completely neglect hedge funds’ picks; on the contrary. There are various reasons behind the low hedge fund returns. Our research indicated that hedge funds’ long positions actually beat the market. A small-cap approach, which includes the top 15 small-cap stock picks of the best hedge fund managers, consistently outperformed the S&P 500 since August 2012. These stocks have returned 142% so far since the launch of the Insider Monkey small-cap strategy in August 2012, whereas the S&P 500 managed to return less than 60% during that time (see the details). This is the primary reason behind our emphasis on hedge fund activity and sentiment.

The smart money in general is also bullish on ManpowerGroup Inc. (NYSE:MAN), as its popularity among the hedge funds that we track increased considerably during the first quarter. A total of 33 firms had an aggregate investment of $774.37 million in the company at the end of March, as compared to 28 funds with $439.31 million at the end of the previous quarter. Aside from Glenview Capital, Chuck Royce‘s Royce & Associates, and Cliff Asness‘ AQR Capital Management are the largest stockholders of ManpowerGroup Inc. (NYSE:MAN) among these firms, with respective stakes of 1.18 million shares valued at $102.01 million and 1.01 million shares valued at $87.41 million.

Although up by a modest 9.46% over the past year, ManpowerGroup Inc. (NYSE:MAN)’s stock has delivered large gains of 34.12% year-to-date. In comparison, the staffing & outsourcing services industry has appreciated by 20.36% over the last 12 months, but only 7.82% so far this year. Currently, the stock is trading at a trailing twelve month earnings multiple of 17.41% as compared to the industry’s average of 30.18. This has resulted in a PEG ratio of 1.75. The company’s trailing twelve month return on investment of 11.21 also exceeds the industry’s average of 7.02.

This month ManpowerGroup Inc. (NYSE:MAN) finalized two acquisition deals geared towards increasing the company’s presence in both the European and Australian markets. This follows the extremely encouraging results that came out of France, the UK, Italy, and Spain in terms of top line contributions during the first quarter. The company acquired the German firm 7A Group for $152.59 million, increasing its market share in the engineering and IT fields, as well as the Australian and Singapore arm of the firm Greythorn for an undisclosed sum. Greythorn specializes in technology and finance when it comes to delivering its professional and recruitment services.

Despite foreign exchange swings eating away $0.17 from ManpowerGroup Inc. (NYSE:MAN)’s EPS for the first quarter, the company’s EPS of $0.83 beat the analyst estimates by $0.04. Revenues of $4.54 billion were also $70 million higher than expectations and marked the seventh consecutive quarter of revenue growth. Moreover, the cost management efforts led to an expansion of the company’s operating profit margin by 10 basis points to 2.7% on a year-over-year basis. Although there was a slowdown in the high-margin career transition business during the quarter, it was more than compensated by strong performance in the Recruitment Process Outsourcing (RPO) and TAPFIN-Managed Services Provider (MSP) businesses.

The company operates four business lines, namely Manpower, Experis, Manpower Group Solutions, and Right Management. Manpower contributed more than 65% of the profits in the last fiscal year. As far as ManpowerGroup Inc. (NYSE:MAN)’s geographical footprint is concerned, Europe contributed about 65% of revenues to the company’s operating profit, while The Americas delivered 21%.

Disclosure: None