An attractive entry point led us to establish a position in Robert Half International, Inc. (NYSE:RHI), a company we have admired for many years and owned in various accounts since 1990. Founded in 1948, Robert Half is the first and largest provider of specialized staffing services, competing globally in some of the most attractive, highest margin segments of the staffing industry–finance, accounting, and IT- which are benefiting from strong secular demand and skilled worker shortages. We believe Robert Half has unique competitive advantages including its market positioning, strong brand name, and best-in-class management. Its focus on small- and middle-market clients, rather than large national accounts supports premium pricing leading to higher margins. Robert Half continues to invest in sophisticated technologies to improve its candidate sourcing and management and job placement capabilities. In addition to its staffing business, we believe the competitive advantages of Robert Half’s Protiviti subsidiary, a leading independent internal audit and business and technology risk consulting firm, make for an exciting story. We believe the $750 million in annual revenue Protiviti generated has the potential to be much larger, its growth driven by a stricter regulatory environment, especially since the financial crisis and the ever increasing need for enhanced data security and privacy. The independence of Protiviti’s internal audit practice is uniquely positioned to benefit from the heightened scrutiny of businesses’ internal financial controls with regulators routinely inspecting the work of larger public accounting firms. Robert Half generates a high ROIC, and its strong free cash flow is returned to shareholders through consistent share repurchases and dividends. We believe Robert Half will be able to continue to grow its revenue and margins. (Susan Robbins)
From Ron Baron (Trades, Portfolio)'s Barons Partners Fund third-quarter 2016 commentary.
