Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Is Kelly Services, Inc. (NASDAQ:KELYA) a bargain? Prominent investors are turning bullish. The number of bullish hedge fund positions that are disclosed in regulatory 13F filings inched up by 1 in recent months. KELYA was in 10 hedge funds’ portfolios at the end of the third quarter of 2016. There were 9 hedge funds in our database with KELYA holdings at the end of the second quarter. At the end of this article we will also compare KELYA to other stocks including TerraForm Global Inc (NASDAQ:GLBL), Sandy Spring Bancorp Inc. (NASDAQ:SASR), and ORBCOMM Inc (NASDAQ:ORBC) to get a better sense of its popularity.
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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What does the smart money think about Kelly Services, Inc. (NASDAQ:KELYA)?
At Q3’s end, a total of 10 of the hedge funds tracked by Insider Monkey were bullish on this stock, a rise 11% from the second quarter of 2016. On the other hand, there were a total of 5 hedge funds with a bullish position in KELYA at the beginning of this year, so the number of bullish hedge fund positions has doubled in 2016. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).
According to Insider Monkey’s hedge fund database, Chuck Royce’s Royce & Associates has the most valuable position in Kelly Services, Inc. (NASDAQ:KELYA), worth close to $26 million. On Royce & Associates’ heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, holding a $3.7 million position. Remaining professional money managers that hold long positions encompass Cliff Asness’ AQR Capital Management, Ken Griffin’s Citadel Investment Group, and Joel Greenblatt’s Gotham Asset Management. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds, which is based on the performance of their 13F long positions in non-micro-cap stocks.
With general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. Citadel Investment Group established the most valuable position in Kelly Services, Inc. (NASDAQ:KELYA). Citadel Investment Group had $1.4 million invested in the company at the end of the quarter. Millennium Management, one of the 10 largest hedge funds in the world, also initiated a $0.3 million position during the quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Kelly Services, Inc. (NASDAQ:KELYA) but similarly valued. These stocks are TerraForm Global Inc (NASDAQ:GLBL), Sandy Spring Bancorp Inc. (NASDAQ:SASR), ORBCOMM Inc (NASDAQ:ORBC), and Perficient, Inc. (NASDAQ:PRFT). This group of stocks’ market caps match KELYA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLBL | 15 | 124310 | -1 |
| SASR | 8 | 19400 | 2 |
| ORBC | 18 | 133227 | 2 |
| PRFT | 9 | 7940 | -1 |
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $37 million in KELYA’s case. ORBCOMM Inc (NASDAQ:ORBC) is the most popular stock in this table. On the other hand Sandy Spring Bancorp Inc. (NASDAQ:SASR) is the least popular one with only 8 bullish hedge fund positions. Kelly Services, Inc. (NASDAQ:KELYA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ORBC might be a better candidate to consider taking a long position in.
Disclosure: None
