Kelly Services (KELYA) Jumped on Management's Reaffirmations on Performance Improvement

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Palm Valley Capital Management, an investment management firm, has issued the second-quarter 2026 investor letter for the "Palm Valley Capital Fund." A copy of the letter can be downloaded here . In the second quarter, the fund's investor class gained 1.80%, while the S&P SmallCap 600 rose 19.7% and the Morningstar Small Cap Total Return Index returned 14.0%. The Strategy primarily focused on small-cap categories, allocating 75% to cash equivalents. This led to underperformance relative to benchmarks. The Fund is currently seeking more small-cap opportunities that meet its return criteria and will act swiftly if market conditions improve. The Index benefited from strong contributions from data center construction and biotech sectors, while the energy industry lagged. Additionally, reviewing the fund's top five holdings can reveal its best investments in 2026.

In its second-quarter 2026 investor letter, Palm Valley Capital Management highlighted Kelly Services, Inc. (NASDAQ: KELYA ) as a leading contributor. Kelly Services, Inc. (NASDAQ:KELYA) is a staffing and workforce solutions company headquartered in Troy, Michigan. On July 7, 2026, Kelly Services, Inc. (NASDAQ:KELYA) closed at $13.51 per share. One-month return of Kelly Services, Inc. (NASDAQ:KELYA) was 15.27%, and its shares gained 6.38% over the past 52 weeks. Kelly Services, Inc. (NASDAQ:KELYA) has a market capitalization of $468.38 million.

Palm Valley Capital Management stated the following regarding Kelly Services, Inc. (NASDAQ:KELYA) in its Q2 2026 investor letter:

"The Fund's top contributors in the second quarter were Kelly Services, Inc. (NASDAQ:KELYA), TrueBlue (ticker: TBI), and Heartland Express (ticker: HTLD). Although Kelly's first quarter results were weak, as expected, management reaffirmed their expectation for improved year-over-year performance for sales and EBITDA margins in each successive quarter of 2026. Additionally, on May 19th, Kelly's controlling shareholder, Hunt Companies, filed an amended 13D requesting that Kelly's board form a special committee of independent directors "so that the company may be prepared to discuss and evaluate new potential opportunities for Kelly involving Hunt and its affiliates if and when presented, without delay." We believe this signals that Hunt plans to make an offer for Kelly. The stock remains below our valuation, so we are holding our position and view this news as a potential favorable catalyst."

Kelly Services, Inc. (NASDAQ:KELYA) is not on our list of 40 Most Popular Stocks Among Hedge Funds Heading Into 2026 . According to our database, 15 hedge fund portfolios held Kelly Services, Inc. (NASDAQ:KELYA) at the end of the first quarter, compared to 20 in the previous quarter. While we acknowledge the potential of Kelly Services, Inc. (NASDAQ: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 .

In another article , we covered Kelly Services, Inc. (NASDAQ:KELYA) and shared Palm Valley Capital Fund's insights on the company last quarter. In addition, please check out our hedge fund investor letters Q1 2026 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.

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