Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year’s Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Kelly Services, Inc. (NASDAQ:KELYA) changed recently.
Kelly Services, Inc. (NASDAQ:KELYA) investors should pay attention to an increase in hedge fund sentiment in recent months. Our calculations also showed that KELYA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Ric Dillon of Diamond Hill Capital
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. Let’s take a gander at the key hedge fund action surrounding Kelly Services, Inc. (NASDAQ:KELYA).
How have hedgies been trading Kelly Services, Inc. (NASDAQ:KELYA)?
At the end of the third quarter, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards KELYA over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Diamond Hill Capital held the most valuable stake in Kelly Services, Inc. (NASDAQ:KELYA), which was worth $5.1 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $5 million worth of shares. Arrowstreet Capital, Two Sigma Advisors, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Zebra Capital Management allocated the biggest weight to Kelly Services, Inc. (NASDAQ:KELYA), around 0.45% of its 13F portfolio. Ellington is also relatively very bullish on the stock, setting aside 0.06 percent of its 13F equity portfolio to KELYA.
Now, key hedge funds have been driving this bullishness. Marshall Wace, managed by Paul Marshall and Ian Wace, established the most outsized position in Kelly Services, Inc. (NASDAQ:KELYA). Marshall Wace had $1.1 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.6 million position during the quarter. The other funds with brand new KELYA positions are Mike Vranos’s Ellington, Joel Greenblatt’s Gotham Asset Management, and Bruce Kovner’s Caxton Associates.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Kelly Services, Inc. (NASDAQ:KELYA) but similarly valued. We will take a look at Continental Building Products Inc (NYSE:CBPX), Seacor Holdings, Inc. (NYSE:CKH), AnaptysBio, Inc. (NASDAQ:ANAB), and Urstadt Biddle Properties Inc (NYSE:UBA). All of these stocks’ market caps are closest to KELYA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CBPX | 17 | 81521 | 0 |
| CKH | 13 | 145440 | -1 |
| ANAB | 15 | 329233 | -1 |
| UBA | 11 | 36367 | 3 |
| Average | 14 | 148140 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $148 million. That figure was $21 million in KELYA’s case. Continental Building Products Inc (NYSE:CBPX) is the most popular stock in this table. On the other hand Urstadt Biddle Properties Inc (NYSE:UBA) is the least popular one with only 11 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately KELYA wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); KELYA investors were disappointed as the stock returned -9.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
