Staffing Sector Recovery Drives Kelly Services’ (KELYA) First Volume Growth in Years

Palm Valley Capital Management, an investment management firm, has issued the third-quarter 2026 investor letter for the "Palm Valley Capital Fund." The letter can be downloaded here. During the quarter, the Palm Valley Capital Fund gained 1.61%, while the S&P SmallCap 600 Index fell 7.93% and the Morningstar Small Cap Total Return Index decreased by 5.60%. As of this period, 75.5% of the Fund's assets were in Treasury bills, and equity-only performance was 4.8%. In the quarter, small caps underperformed large caps, with the S&P 500 nearing its highs. High volatility in stocks during a rising market is similar to that of the tech bubble. Current trends show a preference for protecting present wealth over ensuring future prosperity, causing wealth redistribution through rising asset prices, resulting in societal disparities. The federal debt exceeding $40 trillion exemplifies this issue, with resources consumed today leading to future obligations. The situation raises critical questions about wealth distribution over time, rather than simply the current disparity between the rich and the poor. Also, check the fund's top five holdings to see its best picks in 2026.

In its third-quarter 2026 investor letter, Palm Valley Capital Fund highlighted Kelly Services, Inc. (NASDAQ:KELYA) as a leading contributor. Headquartered in Troy, Michigan, Kelly Services, Inc. (NASDAQ:KELYA) is a staffing and workforce solutions company. On October 02, 2026, Kelly Services, Inc. (NASDAQ:KELYA) closed at $15.72, with a $568.33 million market capitalization. Kelly Services, Inc. (NASDAQ:KELYA) posted a ~79.89% YTD gain, trading within a 52-week range of $7.98 to $17.75.

Palm Valley Capital Fund stated the following regarding Kelly Services, Inc. (NASDAQ:KELYA) in its Q3 2026 investor letter

"During the quarter, the three positions contributing the most to the Fund's return were Kelly Services, Inc. (NASDAQ:KELYA), ManpowerGroup (ticker: MAN), and Amdocs (ticker: DOX). Kelly and Manpower shares were bid on a developing recovery in the staffing sector, which has experienced improved volumes in 2026 for the first time in several years. Manpower's constant currency growth in Q2 was +6%, supported by strong U.S. demand. Kelly's second quarter results improved significantly sequentially and exceeded guidance."

Kelly Services, Inc. (NASDAQ:KELYA) is not on our list of the 40 Most Popular Stocks Among Hedge Funds. According to our database, 18 hedge fund portfolios held Kelly Services, Inc. (NASDAQ:KELYA) at the end of the second quarter, compared to 15 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 discussed Kelly Services, Inc. (NASDAQ:KELYA) and shared Palm Valley Capital Management's insights on the company from the previous quarter. In addition, please check out our hedge fund investor letters Q3 2026 page for more investor letters from hedge funds and other leading investors.

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This article is originally published at Insider Monkey.