The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 817 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of September 30th, about a month before the elections. In this article we look at what those investors think of Kelly Services, Inc. (NASDAQ:KELYA).
Is KELYA a good stock to buy now? Kelly Services, Inc. (NASDAQ:KELYA) investors should pay attention to a decrease in hedge fund sentiment recently. Kelly Services, Inc. (NASDAQ:KELYA) was in 9 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 14. 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 for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. With all of this in mind we’re going to take a look at the recent hedge fund action encompassing Kelly Services, Inc. (NASDAQ:KELYA).
Do Hedge Funds Think Kelly Services, Inc. (NASDAQ:KELYA) Is A Good Stock To Buy Now?
At the end of September, a total of 9 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -18% from the second quarter of 2020. By comparison, 14 hedge funds held shares or bullish call options in KELYA a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were adding to their holdings significantly (or already accumulated large positions).
Among these funds, Arrowstreet Capital held the most valuable stake in Kelly Services, Inc. (NASDAQ:KELYA), which was worth $4.3 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $3.4 million worth of shares. Two Sigma Advisors, D E Shaw, and Marshall Wace LLP 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 Tudor Investment Corp allocated the biggest weight to Kelly Services, Inc. (NASDAQ:KELYA), around 0.01% of its 13F portfolio. Arrowstreet Capital is also relatively very bullish on the stock, designating 0.01 percent of its 13F equity portfolio to KELYA.
Since Kelly Services, Inc. (NASDAQ:KELYA) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few funds that elected to cut their positions entirely last quarter. Interestingly, Ken Griffin’s Citadel Investment Group cut the largest investment of all the hedgies tracked by Insider Monkey, valued at about $1.5 million in stock. Greg Eisner’s fund, Engineers Gate Manager, also dropped its stock, about $0.5 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.
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. These stocks are Unisys Corporation (NYSE:UIS), MGP Ingredients Inc (NASDAQ:MGPI), The Shyft Group, Inc. (NASDAQ:SHYF), Kadmon Holdings, Inc. (NASDAQ:KDMN), Solar Capital Ltd. (NASDAQ:SLRC), Federal Agricultural Mortgage Corp. (NYSE:AGM), and Hollysys Automation Technologies Ltd (NASDAQ:HOLI). This group of stocks’ market caps are similar to KELYA’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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 $80 million. That figure was $11 million in KELYA’s case. Kadmon Holdings, Inc. (NASDAQ:KDMN) is the most popular stock in this table. On the other hand MGP Ingredients Inc (NASDAQ:MGPI) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Kelly Services, Inc. (NASDAQ:KELYA) is even less popular than MGPI. Our overall hedge fund sentiment score for KELYA is 22.3. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Hedge funds clearly dropped the ball on KELYA as the stock delivered strong returns, though hedge funds’ consensus picks still generated respectable returns. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 32.9% in 2020 through December 8th and still beat the market by 16.2 percentage points. A small number of hedge funds were also right about betting on KELYA as the stock returned 34.4% since Q3 (through December 8th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.