Here’s Why Kelly Services (KELYA) Traded Down in Q2

Palm Valley Capital Management, an investment management firm, released the “Palm Valley Capital Fund” second quarter 2025 investor letter. A copy of the letter can be downloaded here.  In the second quarter, Palm Valley Capital Fund appreciated 0.82% compared to a 4.90% gain for the S&P SmallCap 600 and a 7.28% rise in the Morningstar Small Cap Total Return Index. Cash was 76.7% of Fund assets at the start of the quarter and 73.6% at the conclusion. Year-to-date, the fund gained 1.39% compared to a 4.46% decline for the S&P SmallCap 600 and a 0.75% rise for the Morningstar Small Cap Index. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its second quarter 2025 investor letter, Palm Valley Capital Fund highlighted stocks such as Kelly Services, Inc. (NASDAQ:KELYA). Kelly Services, Inc. (NASDAQ:KELYA) is a staffing solutions provider to various industries. The one-month return of Kelly Services, Inc. (NASDAQ:KELYA) was 1.71%, and its shares lost 38.62% of their value over the last 52 weeks. On July 7, 2025, Kelly Services, Inc. (NASDAQ:KELYA) stock closed at $12.49 per share, with a market capitalization of $438.434 million.

Palm Valley Capital Fund stated the following regarding Kelly Services, Inc. (NASDAQ:KELYA) in its second quarter 2025 investor letter:

“The Fund’s three largest detractors in the quarter were ManpowerGroup (ticker: MAN), Carter’s (ticker: CRI), and Kelly Services, Inc. (NASDAQ:KELYA). In contrast to Manpower, Kelly Services has been outperforming the domestic and global staffing industry. Kelly reported slight organic revenue growth in Q1 as a result of strong performance in Education services. However, Kelly’s margins were slightly softer than indicated, and management disclosed impacts from DOGE initiatives. Furthermore, the company announced meaningful restructuring charges through the rest of 2025 to integrate a prior acquisition and modernize technology systems. Kelly’s stock trades at a deep discount to its tangible book value of $19.40 per share and our cash flow valuation.”

Is Kelly Services, Inc. (KELYA) The Most Undervalued Stock With Smart Money Ratings?

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Kelly Services, Inc. (NASDAQ:KELYA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held Kelly Services, Inc. (NASDAQ:KELYA) at the end of the first quarter, compared to 19 in the previous quarter. Kelly Services, Inc. (NASDAQ:KELYA) reported revenue of $1.16 billion in the first quarter, an increase of 11.5% from Q1 2024. While we acknowledge the potential of Kelly Services, Inc. (NASDAQ:KELYA) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Kelly Services, Inc. (NASDAQ:KELYA) and shared the list of most undervalued stocks with smart money ratings. Palm Valley Capital Fund increased its holdings in Kelly Services, Inc. (NASDAQ:KELYA) in the previous quarter. In addition, please check out our hedge fund investor letters Q2 2025 page for more investor letters from hedge funds and other leading investors. While we acknowledge the potential of KELYA as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you’re looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.