UBS’ Bottom Quant Stocks In AI, IT, Healthcare & Others: 29 Stocks In All Sectors

13. Paychex Inc. (NASDAQ:PAYX)

Number of Hedge Fund Investors In Q2 2024: 34

Sector: Industrial

Paychex Inc. (NASDAQ:PAYX) is a business software company that enables firms to manage their payrolls and human resource operations. Roughly 73% of the firm’s revenue comes through its management solutions business which primarily covers payroll processing. Consequently, Paychex Inc. (NASDAQ:PAYX)’s performance is tied closely to the economy, and it was another stock that soared after the results of the 2024 Presidential Election were finalized. This was because investors expect the economy to perform well in a Trump Administration. Yet, Paychex Inc. (NASDAQ:PAYX) depends quite a bit on the performance of small and medium businesses. Their fortunes are tied more closely to interest rates as well as the US economy, and the firm’s dependence on the labor market makes it vulnerable to any lackluster performance.

Paychex Inc. (NASDAQ:PAYX)’s management commented on what it’s observing across small and medium businesses during Q1 2025 earnings call. Here is what they said:

“So I would say this is what we’re seeing pretty consistently across the board is we continue to see moderate growth both in the small and the mid-market. I would say from a demand perspective, certainly what we’re seeing across the board is a lot more demand for driving efficiency or HR outsourcing. I think the pure tech play particularly up in the mid-market to enterprise, I see a little bit slower decision making going on there, but we’re not seeing that in the upper end of our HR outsourcing market. So I think right now what I see across the board are businesses are trying to drive efficiency and are looking for opportunities to reduce costs in their business.”