Palm Valley Capital recently released its Q1 2020 Investor Letter, a copy of which you can download below. The fund posted a return of 0.79% for the quarter, outperforming its benchmark, the S&P Small Cap 600 Index which returned -32.65% in the same quarter. You should check out Palm Valley Capital’s top 5 stock picks which helped them beat the market by nearly 33 percentage points. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.
In the said letter, Palm Valley Capital highlighted a few stocks and Kelly Services Inc (NASDAQ:KELYA) is one of them. Kelly Services is an office staffing company that operates globally. Year-to-date, KELYA stock lost 37.3% and on May 18th it had a closing price of $14.11. Here is what Palm Valley Capital said:
“Kelly Services (KELYA) is a longstanding, low-margin staffing business with specialties in scientific and clinical, engineering, IT, finance, manufacturing, and K-12 educational placements. The business is average, but the balance sheet is superb. Staffing businesses will struggle in the near-term, however, we acquired Kelly’s shares for a steep discount to its liquid net assets, which include receivables and marketable securities. Kelly experienced minimal losses on its receivables during the 2008 credit crisis, and even if charge offs were 20x worse this cycle, the valuation discount would remain intact.”
In Q3 2019, the number of bullish hedge fund positions on KELYA stock increased by about 30% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with KELYA’s growth potential.
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like this one. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. You can subscribe to our free enewsletter below to receive our stories in your inbox:
Disclosure: None. This article is originally published at Insider Monkey.