Does GEE Group (JOB) Provide Potential Opportunity for Investors?
SRK Capital, an investment management company, recently released its fourth-quarter investor letter. A copy of the same can be downloaded here. In 2022, SRK Fund I, LP appreciated by 35.31% while the S&P 500 and the Russell 2000 declined by -18.11% and -20.47%, respectively. In addition, you can check the top 5 holdings of the fund to know its best picks in 2022.
SRK Capital highlighted stocks like GEE Group Inc. (NYSE:JOB) in the fourth quarter investor letter. Based in Jacksonville, Florida, GEE Group Inc. (NYSE:JOB) is a staffing and placement services providing company. On February 15, 2023, GEE Group Inc. (NYSE:JOB) stock closed at $0.4640 per share. One-month return of GEE Group Inc. (NYSE:JOB) was -8.17% and its shares lost 22.65% of their value over the last 52 weeks. GEE Group Inc. (NYSE:JOB) has a market capitalization of $53.105 million.
SRK Capital made the following comment about GEE Group Inc. (NYSE:JOB) in its Q4 2022 investor letter:
"GEE Group Inc. (NYSE:JOB) is a staffing company with a focus on contract and permanent staffing in the professional sector (IT, Finance, Accounting, etc.).
Gee Group surprised shareholders in Q4 with an ugly earnings report due to a significant increase in operating expenses. The increase in operating expenses was due to the issuance of large bonuses to employees for their record setting year. The market reacted by swiftly dropping the stock 40%. The issue is not with the bonuses, as they were deserved. The issue is with how management handled it, by not accruing the bonuses as a liability over the course of the year but instead stuffing them into Q4 earnings. The second issue was the failure to commit to a plan to return capital to shareholders. The sell-off has provided a perfect opportunity to repurchase shares with more than $18 million in cash on the balance sheet. This is a simple business that currently only needs $3-$4 million in cash to operate. Staffing companies tend to collect cash and increase cash flow more in a downturn because they are collecting accounts receivable that were on the books faster than their expending money for contract payroll. A relatively short lived downturn in the labor market should be a limited concern for the company. The company could realistically repurchase half of the shares outstanding over the next two years through cash on hand and free cash flow. Insiders own about 5% of the shares, making Gee Group a potentially ripe opportunity for an activist investor. I will be highly interested in how the company communicates their capital allocation plans on the next earnings call."
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GEE Group Inc. (NYSE:JOB) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 5 hedge fund portfolios held GEE Group Inc. (NYSE:JOB) at the end of the third quarter, which was 4 in the previous quarter.
We discussed GEE Group Inc. (NYSE:JOB) in another article and shared Alluvial Capital Management’s views on the company. In addition, please check out our hedge fund investor letters Q4 2022 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.
