Three outsourcing buys

The 18-company strong outsourcing industry is hot these days. It is ranked #3 out of the 265 industries that Zacks ranks. In the last week of August the covering analysts made five positive earnings estimate revisions and zero negative revisions.

In previous weeks, this ranking was #52, #32 and #28. That tells you that there is momentum to the jump in rankings and that the outsourcing sector is in an upward trend.

When a group of stocks is on a momentum run it is best to jump on or get out of the way. Momentum is earnings estimate revisions fuel and keeps the stock price fire burning to new heights.

Nowadays, you hear of outsourcing a lot in the business world. Why?

A July CIO magazine article attempted to answer this question. It noted that the days of low-cost commodity services are waning, as IT organizations seek stronger strategic partnerships with IT outsourcing providers in an era of digital transformation.

Some of the key points included that digital transformation is driving demand away from compartmentalization and silos of service delivery and toward frictionless integration according to David J. Brown, global head of KPMG’s Shared Services and Outsourcing Advisory.

Enterprises are moving more workloads to the public cloud, but continuing to run certain applications in dedicated private cloud environments for security, regulatory or competitive reasons. So they’re looking for providers that can seamlessly manage and integrate their hybrid cloud environments according to Rahul Singh, managing director with business transformation and outsourcing consultancy Pace Harmon. 

Steve Hall, a partner with sourcing consultancy Information Services Group noted that organizations are rapidly transforming to agile enterprises that require rapid development cycles and close coordination between business, engineering and operations. He stated, “Global delivery requires a globally distributed agile process to balance the need for speed and current cost pressures.”

Given what we have learned, here are three Top Zacks picks to play this trend: The Brink’s Company (BCO), Broadridge Financial Solutions (BR) and TriNet Group (TNET). These three firms have been on fire, and as is usually the case, the trend is your friend (see “Trending” below).