Kaminsky's Call: Beware of Companies on a Hiring Spree
Remember when hiring was considered a sign of strength?
Google 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.
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.
Gary Kaminsky does not hold any equity positions.
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