Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Is Kelly Services, Inc. (NASDAQ:KELYA) a buy here? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund bets rose by 3 recently. Our calculations also showed that KELYA isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let’s view the new hedge fund action surrounding Kelly Services, Inc. (NASDAQ:KELYA).
How have hedgies been trading Kelly Services, Inc. (NASDAQ:KELYA)?
At Q4’s end, a total of 10 of the hedge funds tracked by Insider Monkey were long this stock, a change of 43% from the second quarter of 2018. By comparison, 9 hedge funds held shares or bullish call options in KELYA a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Kelly Services, Inc. (NASDAQ:KELYA) was held by Diamond Hill Capital, which reported holding $6.6 million worth of stock at the end of December. It was followed by AQR Capital Management with a $2.4 million position. Other investors bullish on the company included Two Sigma Advisors, Renaissance Technologies, and Zebra Capital Management.
As aggregate interest increased, specific money managers have been driving this bullishness. Diamond Hill Capital, managed by Ric Dillon, created the biggest position in Kelly Services, Inc. (NASDAQ:KELYA). Diamond Hill Capital had $6.6 million invested in the company at the end of the quarter. Jim Simons’s Renaissance Technologies also made a $1 million investment in the stock during the quarter. The following funds were also among the new KELYA investors: D. E. Shaw’s D E Shaw, Minhua Zhang’s Weld Capital Management, and Matthew Hulsizer’s PEAK6 Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Kelly Services, Inc. (NASDAQ:KELYA). We will take a look at Associated Capital Group, Inc. (NYSE:AC), PC Connection, Inc. (NASDAQ:CNXN), Kenon Holdings Ltd. (NYSE:KEN), and Grupo Supervielle S.A. (NYSE:SUPV). This group of stocks’ market values are similar to KELYA’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AC | 4 | 61237 | 0 |
| CNXN | 6 | 39609 | -2 |
| KEN | 1 | 1200 | 0 |
| SUPV | 10 | 43989 | 0 |
| Average | 5.25 | 36509 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 5.25 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $13 million in KELYA’s case. Grupo Supervielle S.A. (NYSE:SUPV) is the most popular stock in this table. On the other hand Kenon Holdings Ltd. (NYSE:KEN) is the least popular one with only 1 bullish hedge fund positions. Kelly Services, Inc. (NASDAQ:KELYA) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately KELYA wasn’t nearly as popular as these 15 stock and hedge funds that were betting on KELYA were disappointed as the stock returned 8.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
