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Kaminsky's Call: Beware of Companies on a Hiring Spree
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CNBC Capital Markets Editor
Remember when hiring was considered a sign of strength?
No more.
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Google [GOOG
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] recently announced they would use just a portion of their mountain of cash to expand, and investors immediately bid down the stock.
So my "Call-to-Action" today may seem a bit counter-intuitive: beware of companies on a hiring spree.
To me, using cash to hire and expand business is a positive action, but for whatever reason, the move is being frowned upon by investors. And as the saying goes, the market is always right, even if you personally disagree with it.
Perhaps, in these times of uncertainty, investors want to see management deploy that capital in ways the expand the bottom-line. Maybe they prefer to have some of that cash returned to them in a form of a dividend.
Either way, I maintain that using cash to expand the business through new waves of hiring is a sign of not only current health, but also better things to come.
Gary Kaminsky
CNBC Capital Markets Editor
But as of now, that view puts me in the minority, and you can't fight the tape. Sometimes, a contrary reaction in one stock's case—Google—is a gift in preventing a future mistake.
I would normally say follow the leaders who can afford new personnel, but the market does not like this move right now. And you can't fight the tape.
Programming note: "The Strategy Session," hosted by David Faber and Gary Kaminsky, airs weekdays at Noon ET on CNBC.
DISCLOSURE:
Gary Kaminsky does not hold any equity positions.
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Past performance is not indicative of future results. Neither Mr. Kaminsky nor CNBC guarantees any specific outcome or profit. You should be aware of the real risk of loss in following any strategy or investment discussed on this website or on the show. Strategies or investments discussed may fluctuate in price or value. Investors may get back less than invested. Investments or strategies mentioned on this website or on the show may not be suitable for you. This material does not take into account your particular investment objectives, financial situation or needs and is not intended as recommendations appropriate for you. You must make an independent decision regarding investments or strategies mentioned on this website or on the show. Before acting on information on this website or on the show, you should consider whether it is suitable for your particular circumstances and strongly consider seeking advice from your own financial or investment adviser.
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