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Dykstra: ADP Calls Should Pay Off

The payroll company's stock has been sold off, but the February calls look right.

Although Alan Greenspan stole some of the Fed's thunder Monday while touring his book, today all eyes will focus fully on Ben Bernanke once again. The Federal Open Market Committee today will determine its course of action in the wake of tumultuous news from economic indicators over the past month.

It seems clear to all that rates will be cut; however, the question remains to what extent. This afternoon will provide a major indicator to investors of how the Federal Reserve Bank expects the economy to perform throughout the remainder of the year.

Automatic Data Processing

(ADP) - Get Report

is known as the country's leader in payroll processing and HR management services, but the company also provides technology-based outsourcing solutions to employers, vehicle retailers and manufacturers. Their recurring revenue stream and high customer-retention rates result in consistent cash flow and below-average business risk.

ADP has the largest market share of both the HR management and payroll processing markets, with 10% and 12% respectively, with more than twice the market of

Paychex

(PAYX) - Get Report

, its closest competitor.

ADP has the added advantage over Paychex by having the ability to provide services to customers of all sizes, which makes it easier to retain clients as customer needs and service requirements grow. Customer retention is well over 90%, which provides investors with significant stability.

The financial well-being of ADP is exceptional, as annual revenue was reported at $7.8 billion, the company's debt is negligible, and cash is close to $2 billion. The company's P/E ratio is 17.74, and its return on equity is 18.30%, making all technical indicators favorable for a deep in-the-money calls play. Monday, the stock closed at $44.35 -- another high-quality stock trading very close to its 52-week low. I will take advantage of the prices and place a limit order to buy 10 contracts of the February 40s (ADPBH), paying $6.20, or better.

Game of Life

A basic principle of economics says that more investment goods today mean greater consumption goods tomorrow. It seems like every day, a new invention or technological advancement surfaces, representing the hope for a "better tomorrow." Most of these advancements are beyond the average human being's comprehension.

Therefore, we marvel at its existence and accept it as once again making our lives easier and more efficient. The medical advancements in vaccines, for instance, have transformed the possibilities of our lifestyles. Cars release a new model every year, with a new gadget that we can't go without, which justifies the few thousand dollars extra spent on the vehicle.

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More fascinating to me, however, is the field of robotics. While most inventions inevitably take the place of humans in some respect or another, robots revolutionize this phenomenon by transforming science fiction futuristic creatures into real members of society.

Surgeries exist today that are carried out by robots. Certainly, the human surgeon is present to overlook the procedure, but who knows how long it will be before the patient will be the only mammal in the operating room. Robots don't have a quiver in their hand, or perspiration dripping onto their brow to force them to make a mistake. Everything is methodical, and seemingly perfect.

In Richardson, Texas, David Hanson, and his company,

Hanson Robotics

, unveiled the artificial boy. It seems that Pinocchio might really be able to come to life after all! This boy, however, goes by "Zeno." Zeno has blinking eyes that can recognize and track people, along with the ability to produce humanlike facial expressions. Zeno is about the size of a typical newborn, standing at 17 inches and weighing in at 6 pounds. Zeno is made from an artificial skinlike material Hanson calls frubber.

Although Zeno is only in the beginning stages of his development, by his release, he will have learned to walk and speak. Zeno will act as a life companion, and will be capable of developing a relationship with someone, at least by recognition of a name to a face. Hanson envisions Zeno as somewhat of a life-teacher that is able to communicate with its owner.

Zeno's brains are synched wirelessly to a computer that uses the same software that made possible all of the special effects in the acclaimed film,

Lord of the Rings

. Hanson hopes to release Zeno within the next three years for a price between $200 and $300.

The Players Club understands the ever-changing nature of our society as a result of the endless possibilities of technology. One thing, however, at least in the history of our nation, has remained relatively the same: money. The financial capital is essential to survival in modern-day society.

While the dollar certainly fluctuates in value with the changes and progression of time, money itself is still the same. By guaranteeing recurring cash flow, through our strategic partner, The Players Club endeavors to provide professional athletes with the one thing that won't go out of style with time. Your car may be "old" next year when the 2009 model is released, but your money will still be money.

Always remember: Life is a journey, enjoy the ride!

At the time of publication, Dykstra had no positions in stocks mentioned.

Nicknamed 'Nails' for his tough style of play, Lenny is a former Major League Baseball player for the 1986 World Champions, New York Mets and the 1993 National League Champions, Philadelphia Phillies. A three time All-Star as a ballplayer, Lenny now serves as president for several privately held businesses in Southern California. He is the founder of The Players Club; it has been his desire to give back to the sport that gave him early successes in life by teaching athletes how to invest and protect their incomes. He currently manages his own portfolio and writes an investment strategy column for TheStreet.com, and is featured regularly on CNBC and other cable news shows. Lenny was selected as OverTime Magazine's 2006-2007 "Entrepreneur of the Year."