EmergingGrowth.com Special Report Kforce, Inc. Emerging Growth
Short Side Stock Pick
MIAMI, January 3, 2013 /PRNewswire/ --
EmergingGrowth.com, a leading digital
financial media company, Reports on Short Side Stock Pick Kforce,
Inc.
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When investing in the markets folks have to be conscious of the
upside potential of a security, and at the same time be able to
accept when a stock becomes overvalued. This is generally a
difficult skill to acquire as most folks look to invest in a
company for the long-term, hoping for appreciation over time. The
retail investor who invests through their 401ks and other defined
contribution plans all buy and hope the fund will be worth more in
the future. The more astute investor and a bunch of hedge fund
managers not only look for hidden gems, but also invest (in other
ways) their capital in companies that are overvalued.
David Einhorn, founder and
president of Greenlight Capital has initiated a bunch of short
positions such as Allied Capital (NYSE: AFC), Lehman Brothers and
Green Mountain Coffee Roasters (NASDAQ: GMCR). The press usually
pegs him as a "destroyer of companies," but most of the time he is
correct that the company's stock is overpriced. When evaluating
financial statements and looking at the company's core operations
and products, many managers believe they can gauge whether future
earnings are correctly priced into the stock. When a company has an
earnings potential shortfall or has a stock price that has run up
too far too fast, many managers will short the company's stock.
This seems to be the case with Kforce.
Kforce Inc (NASDAQ: KFRC) provides professional and technical
staffing services and solutions in the
United States. It operates in five segments: Technology,
Finance and Accounting, Clinical Research, Health Information
Management, and Government Solutions. The stock is trading just
above $14.50 a share, with a 52-week
range of $9.57 to $14.92. The company
recently hit its 52-week high of $14.92 on December
28, and pulled back slightly. Less than a couple of months
ago the stock was trading as low as $10.32, but over the last six weeks there has
been a considerable move to the upside (about 29%).
The company announced earlier this quarter that a special
dividend payout before the New Year of $1.00 a share will be distributed, equating to a
total payout for Kforce of $36
million. This has been a common practice by many companies
due to the previous uncertainty surrounding the fiscal cliff, and
becoming more focused on the dividend tax that will be applied in
2013. It can be viewed as a negative as some would argue that
dividend is being pushed up so that investors stay in the stock,
and do not flee due to other reasons. On the flip side a special
dividend distribution may also be viewed as a company rewarding its
shareholders, and allowing them to avoid a potential dividend tax
hike. In the case of Kforce it appears that the former applies.
There has been an extreme amount of insider selling in the stock
as of late, which causes concern about the company's near-term
performance. Ralph Struzziero filed
to sell 4,000 shares in December. Howard
Sutter (Officer & Director) sold 40,000 shares in
December. Richard Cocchiaro filed to
sell 364,399 shares in December. Despite the considerably strong
insider selling, the stock has appreciated during the month of
December, a few dollars shy of its five-year high of $17.55 on February 7,
2011.
Despite the environment for professional staffing viewed to be
positive by the company, its last earnings report was not stellar.
Revenues from continuing operations for the quarter ended
September 30, 2012 were $270.2 million compared to $274.1 million for the quarter ended June 30, 2012, a decrease of 1.4%. With outlook
growing more uncertain due to many macroeconomic headwinds, the
company is expected to suffer at least for the first half of 2013.
After such a tremendous run to the upside, a grim outlook (as
stated by the CE), and strong insider selling, investors should
look to sell short KFRC over the next few months.
Heading into the fourth quarter 2012, the most shorted stocks
were First Solar (NASDAQ: FSLR), JC Penny (NYSE: JCP) and GameStop
(NYSE: GME). Their short interest vs. the public float was
47%, 40% and 36% respectively.
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