×

Cramer: Behind the staggering moves of Insperity

Once in a while, a sleepy stock will suddenly wake up and take off so fast that it takes Jim Cramer's breath away. That is exactly what happened with Insperity, the once-placid outsourcing company that has soared 52 percent this year.

"When you see that kind of staggering move, you have to wonder what the heck is going on here," the "Mad Money" host said.

Now that the stock has finally pulled back from its highs, Cramer was ready to figure out what prompted such incredible performance, and if the stock has more room to run.

Insperity is best known as a business process outsourcing play that handles human resources and administrative processes. It has been around for almost 30 years, and has been publicly traded since 1997. Its aim is to help other companies succeed by taking care of the tedious tasks that can distract management from the bigger picture.

"The company has over 100,000 corporate clients, and its balance sheet is a thing of beauty," Cramer said.





Soaring going up
Wade Eakle | Getty Images

Things started to become more exciting for the company in 2015, when activist hedge fund Starboard Value took a major stake in the company. That prompted the stock to rally 42 percent last year.

Starboard made itself the company's largest shareholder and then issued a public letter that listed ways it saw management had underperformed and what needed to be done to get the company back on track. It recommended aggressively cutting administrative and advertising costs and proposed an aggressive buyback.

Starboard also argued that Insperity should consider putting itself up for sale to attract private equity firms. In March 2015, Insperity announced it had reached an agreement with Starboard where CEO Paul Sarvadi remained at the helm, but Starboard had two board seats and a third to be appointed later. After that, there wasn't much news for the rest of 2015.

"Sometimes, though, it just takes a while for these activist efforts to bear fruit," Cramer said.

The stock catapulted when Insperity reported a terrific quarter at the beginning of May. Many investors interpreted the results as evidence that Starboard's intervention was paying off.

"This is the story of an underperforming company that has been whipped into shape over the past year-and-a-half by some smart activist investors at Starboard Value," Cramer said.

However, activists at Starboard have also been selling the stock, as the hedge fund confirmed it had sold more than half of its position in Insperity earlier this month. Cramer thinks that was just a matter of plucking low hanging fruit considering how much the stock had run.

So, while Cramer does like Insperity and he thinks the stock can go higher, the reality is that all of the easy money has been made already. It could have more room to run, but it won't likely be another 40 percent gain.

Questions for Cramer?
Call Cramer: 1-800-743-CNBC

Want to take a deep dive into Cramer's world? Hit him up!
Mad Money Twitter - Jim Cramer Twitter - Facebook - Instagram - Vine

Questions, comments, suggestions for the "Mad Money" website? madcap@cnbc.com