Palm Valley Capital Management, an investment management firm, released the “Palm Valley Capital Fund” fourth quarter 2024 investor letter. A copy of the letter can be downloaded here. In the fourth quarter, Palm Valley Capital Fund declined -0.09% outperforming the -0.58% decline in the S&P SmallCap 600 and slightly underperforming the 0.32% gain in the Morningstar Small Cap Total Return Index. The Fund faced losses on certain equity positions, but these were partly balanced out by gains from Treasury bill holdings. During the quarter the equity positions in the Fund reduced by 3.6%. Cash equivalents comprised 78% of the fund’s assets at the period’s end. In addition, please check the fund’s top five holdings to know its best picks in 2024.
Palm Valley Capital Fund highlighted stocks like Kelly Services, Inc. (NASDAQ:KELYA) in the fourth quarter 2024 investor letter. Kelly Services, Inc. (NASDAQ:KELYA) provides workforce solutions to various industries. The one-month return of Kelly Services, Inc. (NASDAQ:KELYA) was -2.14%, and its shares lost 28.92% of their value over the last 52 weeks. On January 6, 2025, Kelly Services, Inc. (NASDAQ:KELYA) stock closed at $14.18 per share with a market capitalization of $506.36 million.
Palm Valley Capital Fund stated the following regarding Kelly Services, Inc. (NASDAQ:KELYA) in its Q4 2024 investor letter:
“We acquired three new positions during the fourth quarter: Kelly Services, Inc. (NASDAQ:KELYA), Seaboard Corporation (ticker: SEB), and Heartland Express (ticker: HTLD). In each case, asset value supports our cash flow-based valuations. Kelly Services is making its third appearance in the Fund since our inception. It is a good illustration of how we follow our valuation discipline. We originally bought Kelly’s stock early in the pandemic. It was later sold, repurchased, and then sold again profitably. After our last sale, we wrote to you (Q2 2024 letter), “Although Kelly has long maintained an excellent balance sheet, in early May the company announced a major acquisition and did not, at the time, share details about the profitability of the target. As a result, we were unable to determine how the deal would affect our valuation, but we believed it could have a material adverse impact and would increase the firm’s financial risk.”
Since then, Kelly has provided financial details for its acquisition, and Kelly’s shares have fallen sharply. Due to its declining price, the company was deleted from the S&P SmallCap 600 Index in late December. Nonetheless, Kelly has meaningfully improved profitability under extremely challenging conditions for the staffing industry. The company has strong positions in the education and science and technology sectors for temporary labor, which are different exposures than the other staffing businesses the Fund owns. We believe the debt Kelly used to fund its latest takeover is manageable even under assumptions of continued industry stress. Kelly’s shares trade for 6x trailing adjusted operating profit and at a 27% discount to the company’s tangible equity.”
A workforce of engineers and construction workers in professional gear, showcasing the company’s capabilities in developing energy infrastructure solutions.
Kelly Services, Inc. (NASDAQ:KELYA) is not on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 11 hedge fund portfolios held Kelly Services, Inc. (NASDAQ:KELYA) at the end of the third quarter which was 17 in the previous quarter. 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 cheapest AI stock.
In another article, we discussed Kelly Services, Inc. (NASDAQ:KELYA) and shared Palm Valley Capital Management’s views on the company in the previous quarter. In addition, please check out our hedge fund investor letters Q3 2024 page for more investor letters from hedge funds and other leading investors.
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Disclosure: None. This article is originally published at Insider Monkey.