BBSI Barrett Business Services Inc.

I've reviewed this US micro-cap HR/PEO outsourcing firm a few times before. As I gather more due digilence, I am more and more impressed with this company's prospects, particularly when the US economy eventually turns around.

I am always particularly cautious with small cap equities-- as I've mentioned before, they can be very risky and when things go poorly you can lose all your capital very quickly. The reward is usually proportionate to the risk and it is common for small companies like Barrett to increase their share price ten fold in five years or less (a "ten-bagger" thanks to Peter Lynch).

If you are still interested I strongly recommend listening to Bill Sheretz's webcast.

In addition to the analysis I've done previously in this blog, the key investment points include:

1. Superb balance sheet and 23% 3 year average growth (dropping to 3% last year) --> we are seeing BBSI still remain profitable and completely debt free in a the worst operating environment for the last 17 years (mostly in California where the bulk of BBSI's work is)
2. 3 new strategic acquisitions made in the last year, paid for in cash
3. 90% employer retention rate, highest in the industry
4. roughly 1/3 of the company's outstanding shares are owned by the CEO-- a man well known for his integrity and management skill (this is his competitor's opinion!).
5. pays a 2% dividend (rare for a microcap) and makes regular share buy backs. This point and the above fact strongly aligns the management's interests with the shareholders and you should like that- a lot.
6. US Gov't will need to tackle the "immigration problem". With demographics skewing to the elderly side of the population curve and a strong possibility that legislation will shut down the "illegals" employment supply, Barrett is positioned to grow rapidly in either case.
7. an emphasis on scalability to attract organic growth and de-emphasize acquisitions (avoid "diworseification")

This is a solid, boring business that is easy to understand-- Lynch/Buffett mandatory requirement for all investments.

I put in a bid for a small quantity and hope to build on the position before the turn around occurs, whenever that will be.

l