Ensemble Pitches Payroll Processing and Homebuilders on CNBC

21 April 2023 | by Ensemble Capital

Yesterday, Ensemble CIO Sean Stannard-Stockton appeared on CNBC to discuss recession risk, our market outlook, thoughts about Fed policy and some of our favorite investment ideas. In the clip below, Sean discussed both the home builder NVR and payroll processing company Paychex.

On NVR and the large homebuilders more generally, Sean talked about the surprising strength in the stocks and how this is being driven by likely large market share gains. With so many existing homes owned with a 3% mortgage homeowners are unlikely to want to sell, so a larger than normal portion of total home sales in the years ahead will need to be made up of new homes. And the largest builders, with low debt and high cash levels, are well positioned to take share from smaller builders.

On Paychex and payroll processing more generally, these businesses are more defensive than most investors appreciate. For instance, in the Great Financial Crisis of 2008-09, Paychex revenue only fell 4%. While a 2%-3% rise in the unemployment rate is common even during mild recession, this only represents about a low single digit decline in employment levels and thus a mild headwind to Paychex’s revenue growth.

If you are reading this post via an email subscription, you can click here to watch the interview.

For more information about positions owned by Ensemble Capital on behalf of clients as well as additional disclosure information related to this post, please CLICK HERE.

While we do not accept public comments on this blog for compliance reasons, we encourage readers to contact us with their thoughts.

Past performance is no guarantee of future results. All investments in securities carry risks, including the risk of losing one’s entire investment. The opinions expressed within this blog post are as of the date of publication and are provided for informational purposes only. Content will not be updated after publication and should not be considered current after the publication date. All opinions are subject to change without notice and due to changes in the market or economic conditions may not necessarily come to pass. Nothing contained herein should be construed as a comprehensive statement of the matters discussed, considered investment, financial, legal, or tax advice, or a recommendation to buy or sell any securities, and no investment decision should be made based solely on any information provided herein. Links to third party content are included for convenience only, we do not endorse, sponsor, or recommend any of the third parties or their websites and do not guarantee the adequacy of information contained within their websites. Please follow the link above for additional disclosure information.