The new quarter rolls in and buyers were quick to grab some early holiday bargains. The Bernanke-induced sell-off has almost worked its way out of the market, although the May high will be a more substantial barrier to break. With the horse now bolted on the eventual tightening of the money flow, Friday’s employment data has a fine line to walk: if the data is too good, then Fed tightening will come sooner rather than later (bearish): if the data is too bad, then there will be pressure on earnings season, also bearish.
But there are stocks positioned to do well regardless of Friday’s announcement:
Automatic Data Processing (NASDAQ:ADP) was an early feature in April of last year. It had a relatively quiet 2012, but once the New Year rolled in, it quickly went on to post new multi-year highs. Negative opinions on the economy had little effect on Automatic Data Processing (NASDAQ:ADP), and the falling trend in unemployment will only feed into the growth prospects for the company (of which Friday’s data will be of general interest, but the broader trend is its friend).
US Unemployment Rate data by YCharts
However, the price-per-earnings advantage Automatic Data Processing (NASDAQ:ADP) held over rival Paychex, Inc. (NASDAQ:PAYX) has disappeared, leaving both stocks on equal pegging going forward:
PAYX Forward PE Ratio data by YCharts
What lets Paychex, Inc. (NASDAQ:PAYX) down is its history of coming in below revenue estimates. Its most recent report was one such case as earnings-per-share missed by $0.03 at $0.31 per share. Meanwhile, Automatic Data Processing (NASDAQ:ADP) has consistently met analyst expectations. Paychex, Inc. (NASDAQ:PAYX)’s earnings inconsistencies are a consequence of its exposure to more vulnerable small and medium sized businesses. However, Paychex, Inc. (NASDAQ:PAYX) does offer a richer dividend yield, although this may be changing.
In the security space is Ambarella Inc (NASDAQ:AMBA). The stock has added nearly 25% from its feature price in April. The chip developer for HD video capture has proven a favorite of buyers, with trading volume on up days nearly double (well, up 80%) that of down days since the start of May. First-quarter results had beat estimates with a 31% rise in revenue, and Q2 revenue estimates were increased from $34.7 million to $37.5 million, or a forecast for up to a 34% growth over the comparable quarter last year. The security camera business is unlikely to slow in the foreseeable future, so prospects remain strong, and the consumer camera market saw “significant growth.” The camera market accounted for 86% of Ambarella Inc (NASDAQ:AMBA)’s Q1 revenue. Better still, the falling price of 4K capable television displays (one rumored for $699 by the fall) will help fuel sales of cameras supporting Ambarella’s Ultra HD resolution chips. However, the company was not expecting a significant revenue this year from 4K resolution video (in the security camera space).
