ADP Here's a company that will benefit from the economic rebound--and doesn't have to worry about rising interest rates
By Donna Rosato

(MONEY Magazine) – If both job growth and interest rates keep rising, as economists expect, that will be very good news for Automatic Data Processing (ADP). Two-thirds of ADP's $7.4 billion annual revenue comes from its employer-services business, which includes processing payroll and tax payments for 470,000 companies. (ADP processes paychecks for more than 30 million people worldwide.) So the more new jobs are created, the more business ADP can get.

But the stock is also a smart play on rising rates: ADP earns interest on the "float"--the money that sits in its account from the time employers deposit their payrolls until the time employees cash their checks. Although holding times vary, ADP earns interest on an average $12 billion in deposits every day. "A small uptick in interest rates goes right to the bottom line," says Janna Sampson, co-manager of the AmSouth Select Equity Fund, who has made ADP the fund's largest holding. Sampson believes ADP will climb to at least $50 by year's end.

Warren Buffett holds 1.4 million shares of ADP in Berkshire Hathaway's portfolio. The firm has all the hallmarks of a classic Buffett pick: little debt, a steady dividend and lots of cash. In fact, it's one of the few nonfinancial companies to hold a triple-A credit rating. "This is a high-quality company that has solid growth prospects," says Oakmark Funds analyst Kurt Funderberg. --DONNA ROSATO