Only a few days ago, the head of the Federal Reserve, Janet Yellen, declared that the U.S economy is expected to improve in spite of a first quarter slump that was caused by a number of temporary factors that struck at the same time, including bad weather. The U.S. economy continues to prove that it can easily stand on its own two feet as the labor market is approaching full strength. Therefore, one of the industries that might be profiting by the continued economic growth is the transportation sector. Even though the NASDAQ Transportation Index dropped by as much as 8% during the last month, the recent increase in U.S. economic activity might mark a turnaround for this sector.
So, let us help you enhance your portfolio’s diversification and performance by suggesting the most fundamentally healthy transportation stocks picked by tracking an immense number of successful hedge funds worldwide. By taking a thorough look at the latest 13F filings, we have identified the top five transportation stocks on the move, which represent the most popular picks among the massive pool of reputable hedge fund managers in our database. We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 139% over the last 32 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).
One of the stocks that is definitely worth your attention is Delta Air Lines Inc. (NYSE:DAL). The stock has attracted quite a bit of attention lately as the number of hedge funds with a stake in the company increased to 116 from 110. Nevertheless, the value of the capital invested in Delta Air Lines from those funds decreased to $7.15 billion from $7.53 billion. That can be attributed to Delta Air Lines Inc. (NYSE:DAL)’s stock, which has been quite volatile lately and is down almost 14% since the beginning of the year. Despite this noticeable slump, investors remain confident in the medium- and long-term performance of Delta Air Lines as it is currently expanding its Latin American network with its recent attempt to connect Orlando, Florida and Sao Paulo, Brazil. Paul Reeder and Edward Shapiro’s PAR Capital Management and Douglas Derhy’s DC Capital Partners are among the biggest shareholders of Delta shares.
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Another top stock pick included in our list is American Airlines Group Inc. (NASDAQ:AAL). Despite the fact that the hedge fund positions in this stock plummeted to 91 from 123, which marks a 26% decrease, the American airline holding company still occupies the second spot on the list. By the same token, the value of the capital invested in this company decreased to $3.47 billion from $6.11 billion. Most of the airline stocks have been declining lately on rising fears of too much capacity growth, and American Airlines Group Inc. (NASDAQ:AAL) is no exception. Nevertheless, only time will tell whether the multitude of hedge funds that sold their entire stakes in American Airlines Group made the right decision. James Dinan‘s York Capital Management is the largest American Airlines Group Inc. (NASDAQ:AAL) shareholder in our database. Billionaire David Tepper sold out his AAL position.
The number of hedge funds holding equity stakes in another airline holding company, United Continental Holdings Inc. (NYSE:UAL), remained somewhat the same, decreasing to 78 from 79 during the latest reporting quarter. However, the overall value of the investments in this company increased by slightly more than 5%, reaching a figure of $3.92 billion compared to $3.73 billion registered at the end of 2014. United Continental Holdings Inc. (NYSE:UAL)’s stock has decreased by nearly 16% during the last trading week as the company has seen numerous negative revisions throughout the past few weeks, which might represent a great buying opportunity for bottom-fishers. As for now, it would make more sense to keep an eye on this company and see whether any signs of a turnaround appear along the way. Among the hedge funds that own sizable stakes in United Continental Holdings Inc. (NYSE:UAL) include Brad Gerstner’s Altimeter Capital Management and Thomas E. Claugus’ GMT Capital.
Another shining star in the transportation sector is Union Pacific Corporation (NYSE:UNP). During the first quarter, the number of hedge funds that hold a long position in this company increased to 69 from 61, which amounts to an increase of more than 13%. Moreover, the value of the total holdings in the railroad operator increased to $2.33 billion from $1.99 billion. In spite of the fact the stock of Union Pacific Corporation (NYSE:UNP) has been on a downtrend throughout the last few months as the company’s coal shipments plummeted by as much as 25% in the recent quarter, it seems that investors are focusing on the medium- and long-term potential of the railway company. Charles Paquelet’s Skylands Capital and Jason Adler’s Alphabet Management are some of the funds that remain bullish on Union Pacific Corporation (NYSE:UNP), as their equity stakes increased during the first quarter.
FedEx Corporation (NYSE:FDX) concludes our list of the five most popular transportation stocks among hedge funds. No changes were reported in the number of hedge funds that own stakes in the American global courier delivery services company during the latest 13F filings, the number remaining at 39. However, the value of the total holdings decreased by slightly more than 1%, declining to $3.39 billion from $3.43 billion. FedEx’s stock has risen almost 1% since the beginning of the year and there is more room to run as the company announced a huge deal to sponsor the prestigious UEFA Europa League. The three-season deal with UEFA discloses FedEx’s plans of expanding its operations in Europe, from which the company might benefit substantially from in the future. Some of the largest equity holders in FedEx include Mason Hawkins’ Southeastern Asset Management and Edgar Wachenheim’s Greenhaven Associates.
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