Kelly Services, Inc. – A Bear Market and Recession “Hedge”
|Written by GSCR Staff|
|Wednesday, 10 February 2016 06:44|
In Monday’s Goldman Guide we discussed our belief that oil is reaching a bottom which means a positive signal for the economy and the markets. Certainly, the week has not started off great but we are sticking to our convictions. With that said we scoured our screeners and generated some themes related to a potential bear market and a downturn in the economy as our small cap “hedge”.
Below is the one-year chart for Kelly Services, Inc. (NASDAQ – KELYA - $16.68) which illustrates the stock is currently trading above the 50-day EMA of $15.89 and up nearly 13% since the second week of January while the major markets have all been in the midst of a major sell-off.
KELYA 1-Year Chart, 50-Day EMA
First off, Kelly Services is a strong ‘recession’ stock. Unfortunately full times jobs disappear and more firms look to hire temporary workers to fill needs as they come up. The Company provides workforce solutions to various industries worldwide. It offers trained employees for data entry, clerical, and administrative support roles; staff for contact centers, technical support hotlines, and telemarketing units; instructional and non-instructional employees for schools; support staff for seminars, sales, and trade shows; assemblers, quality control inspectors, and technicians for electronic assembly; maintenance workers, material handlers, and assemblers for industrial light maintenance; and temporary and full-time placement services, as well as direct-hire placement and vendor on-site management services.The Company also provides scientists, and scientific and clinical research workforce solutions; engineering professionals and information technology specialists across various disciplines; creative services, including placing creative talent in the spectrum of creative services positions; financial professionals; healthcare specialists and professionals; and legal professionals.
Two metrics we are really looking hard at in these times are EPS growth and Enterprise Value related to M & A activity. The EPS is forecast to grow close to 20% from 2015 to 2016 and another 9% from 2016 to 2017. Additionally, the Company beat EPS expectations for 4Q15 by 80% coming in at $0.88 versus the $0.49. The M & A potential is also there for Kelly is an attractive target with an Enterprise Value to EBITDA at a low 7.3.
KELYA is also an attractive play from the technical short float measure, coming in at 2.6%. The stock is set to run and should reach the 52-week high with a pop of 10% by the start of 2Q16.
Have a great day!
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