Six years and counting. That is how long the market has been in an upward trend since the bottom in March of 2009. The S&P 500 is up over 200%, and we have not had a 10% correction in over three years. Someday, something’s going to give. A new report from Jefferies points out that despite stock market highs and unemployment being at multiyear lows, even the head of the Federal Reserve has commented that equity valuations are “quite high” and economic data is sketchy at best.
In an outstanding piece of work, the Jefferies team researched what stocks held their own when the market was getting thrashed back in 2009. They came up with a list of nine business services stocks. They narrowed that list to the four that came up the most defensive, and all four are rated Buy at Jefferies.
This stock made the final four, and it actually saw EBITDA margins grow in 2009. ABM Industries Inc. (NYSE: ABM) is a leading provider of facility solutions with revenues of approximately $5 billion and 118,000 employees in over 300 offices deployed throughout the United States and various international locations. ABM’s service capabilities include electrical and lighting, energy solutions, facilities engineering, HVAC and mechanical, janitorial, landscape and turf, parking and security, provided through stand-alone or integrated solutions.
ABM also provides custom facility solutions in urban, suburban and rural areas to properties of all sizes, from schools and bank branches to the largest and most complex facilities, such as airports, hospitals and manufacturing plants.
ABM investors are paid a 2% dividend. The Jefferies price target for the stock is $37. The Thomson/First Call consensus price target is $33.71, and shares closed Tuesday at $32.52.
Bright Horizon Family Solutions
This company posted solid first-quarter results that came in above Wall Street estimates. Bright Horizon Family Solutions Inc. (NYSE: BFAM) is a leading provider of high-quality child care, early education and other services designed to help employers and families better address the challenges of work and life. It provides center-based full service child care, back-up dependent care and educational advisory services to more than 900 clients across the United States, the United Kingdom, Ireland, the Netherlands, Canada and India.
The Jefferies team says the company has multiple growth levers, which include enrollment and pricing, and it did well during the downturn. They see the company back on the mergers and acquisitions (M&A) track this year as well.
The Jefferies price target is $62, and the consensus target is $55. The stock closed Tuesday at $54.47 per share.
FactSet Research Systems
The company actually saw positive organic growth in 2009. FactSet Research Systems Inc. (NYSE: FDS) is a global provider of financial information and analytics, and it helps the world’s best investment professionals outperform. More than 55,000 users stay ahead of global market trends, access extensive company and industry intelligence, and monitor performance with FactSet’s desktop analytics, mobile applications and comprehensive data feeds. The company has been included in Fortune’s Top 100 Best Companies to Work For.
The company recently raised the dividend paid to shareholders by 13%. The Jefferies team cites the company’s small size (4% share) and expertise in upselling, which they think should ensure sustained growth. They also think the new CEO could be more aggressive in M&A.
FactSet investors are paid a 1% dividend. The Jefferies price target is $190, and the consensus target is much lower at $149.45. Very odd when the stock closed most recently at $167.86.
This stock comes out as the top defensive business services stocks in the Jefferies report. Rollins Inc. (NYSE: ROL) is a premier global consumer and commercial services company. Through its wholly owned subsidiaries, Orkin, HomeTeam Pest Defense, Orkin Canada, Western Pest Services, Critter Control, The Industrial Fumigant Company, TruTech, Rollins Australia, Waltham Services, PermaTreat and Crane Pest Control, the company provides essential pest control services and protection against termite damage, rodents and insects to more than 2 million customers in the United States, Canada, Central America, South America, the Caribbean, the Middle East, Asia, the Mediterranean, Europe, Africa, Mexico, and Australia from more than 500 locations.
Rollins came out on top of many of the metrics, from recurring revenue to having a solid mix of commercial and retail home pest control customers.
Rollins investors are paid a 1.3% dividend. The Jefferies price target is $28, and the consensus is at $26.56. The stock closed Tuesday at $24.67.
While nobody expects an immediate market crash, adding top stocks that can do well in a solid market and outstanding in a market meltdown may be perfect additions to almost any portfolio.