SL: How Hiring Can Guide You to Quick 50% Gains
Subtext: The secret to quick Moneyball profits…
[Test],
Hello and welcome back for a very special Friday episode of Moneyball Economics…
Because today, it’s time to take another look at the latest hiring data from our top stocks.
In case you missed our previous updates, our premise is pretty simple. When companies know they’re headed for prosperous times, they tend to ramp up hiring to handle all the new business. So hiring can (sometimes) be a powerful leading indicator that a stock’s price is about to go up.
Let’s see if that’s really the case, though…
Video transcript:
I’m Andrew Zatlin. Welcome to Moneyball Economics.
I am a strong believer in using hiring data to spot investment opportunities. Companies that are growing their payrolls are doing so because they’re seeing business growth and companies that are seeing an acceleration in their hiring, well, that’s because they’re looking out on the horizon and they’re seeing an acceleration of sales in the pipeline. They’re trying to get ahead of it in anticipation of that growth.
Boiled down, today’s hiring growth is tomorrow’s revenue growth and by extension it should be also stock price growth.
And that’s the experiment that we’ve been running for the past two months.
That is, I’ve identified six companies where I see an acceleration in their hiring growth and that to me should indicate an acceleration in stock price growth and we are tracking it. However, two words of caution. First, this is not a recommendation for stocks.
This is an experiment.
We’re trying to see if companies that are exhibiting accelerating hiring growth will see acceleration in the stock price growth. Secondly, this is something that plays out over time. This is not a week or a one month type of experiment. Over time, we should see these rates converge. We should see that the hiring growth rate, whether it’s moving up or starting to slow down, will be mirrored in the stock price growth.
So with that in mind, let’s take a look at the six companies that we have been looking at starting with Microchip Technology.
Microchip technology, well, wow, up 50% stock price in the last two months. And that’s because as you can see from this chart where we’re looking at in the blue, the year over year hiring and in the orange, the year over year price, you can see they’re moving in lockstep and both are up and to the right indicating that not only is hiring accelerating and strong year over year, so is the stock price.
Off on the side note, at some point in time, hiring slows down. It doesn’t mean it goes negative. It just means that the pace starts to slow down. And similarly, the stock price pace, that amount of growth will slow down, but it doesn’t mean the stock price stops growing.
Let’s now take a look at Chevron.
Chevron, again, just like microchip, we’re seeing the stock price echo, excuse me, the stock price growth echo the hiring growth. But what’s interesting is it’s lagging. The hiring growth is accelerating at a faster pace than the stock price is doing. That would indicate that the stock price is getting ready to make a big move. And in fact, over the past two months, the stock price has been pretty much flat up 2%. Wouldn’t be surprised to see Chevron’s stock price go up.
That, however, is not the case with MasTec.
Now, MasTec is really interesting.
As you can see in the near term, MasTec’s stock price is accelerating a lot faster than the hiring pace. And we’ve seen that over the course of time. You can see a couple of times where in 2024 and in 2023, the stock price pace, well, it gets ahead of the hiring pace and then reconverges. That reconvergence is probably in the cards coming up shortly and I’m probably going to take the form of a stock price retreat.
Let’s see how that plays out. Now, last month we talked about three other companies starting with Halliburton.
Now this one’s interesting because Halliburton’s hiring continues to be up and to the right, but over the past month or two, the pace of the stock price, well, it’s exhibiting a sharp pullback in stock price. You can see how over time stock price is going to reconverge with the hiring.
Well, if I do a little digging, it turns out that the Iran situation is causing a lot of this Halliburton being out of favor, the stock price to come back down. Well, there’s probably a reversal in the cars. Wouldn’t be surprised if the stock price jumps up and reconverges with the pace of hiring.
MSI, Motorola.
Okay, what is going on here? We are seeing acceleration on acceleration with hiring and yet the stock price has collapsed and the year over year pace of stock price growth has collapsed. The experiment says we should see an acceleration in the stock price growth.
So that would suggest that starting in the next couple of months, the Motorola stock will be moving up and moving up sharply. All right.
Last but not least brings us to Shake Shack showing kind of the same size as Motorola and as Halliburton pace of hiring continues to accelerate, but the stock price does not.
However, more recently it does look like potentially the stock price is going to accelerate. However, when I do a closer look at this, I don’t see a strong historic correlation.
So while I see Shake Shack going up with their hiring, it doesn’t seem to appear that the stock price moves in a way that reflects that historically. So maybe Shake Shack is one of those six in our experiment that we want to start walking away from that really, it should not have been part of this experiment. All right, let’s talk about this month and I’d like to introduce two companies also for your consideration this experiment.
One of them is F5.
F5 is a player in the network infrastructure backbone, which guess what? They’re going to be benefiting from AI. And indeed, I’m starting to see an upturn over the past couple of months in their hiring, seeing a similar upturn in the pace of the stock price.
But I see the stock price kind of sort of lagging the hiring pace, potentially a lot more upside over the next couple of months.
GM, wow, GM is on fire for their hiring.
Their hiring is surging, not to be surprised so is the pace of their stock price. Here it is continuing to be up and to the right there moving in lockstep. Let’s see how this plays out because GM is certainly in a growth cycle.
Bottom line, let’s run this experiment over the next few months and let’s see if indeed we’re correct. Maybe we’ll add a couple more stocks as we go along, but right now we see that there are a couple of companies where indeed there’s strong correlation.
We see a couple of companies where the stock price seems to be lagging what is indicated in the hiring data. It’d be interesting to say, let’s put a stake in the ground and say, “What happens if you were to buy today? Where will that stock go? ”
We’re in it to win it, folks.
Zatlin out.
Andrew Zatlin
Editor, Moneyball Economics