In this article we will analyze whether XPO Logistics Inc (NYSE:XPO) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
XPO Logistics Inc (NYSE:XPO) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 40 hedge funds’ portfolios at the end of the first quarter of 2021. Our calculations also showed that XPO isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Snap-on Incorporated (NYSE:SNA), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), and CenterPoint Energy, Inc. (NYSE:CNP) to gather more data points.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Gray of Orbis Investment Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s analyze the latest hedge fund action encompassing XPO Logistics Inc (NYSE:XPO).
Do Hedge Funds Think XPO Is A Good Stock To Buy Now?
At Q1’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in XPO over the last 23 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Orbis Investment Management was the largest shareholder of XPO Logistics Inc (NYSE:XPO), with a stake worth $1579.2 million reported as of the end of March. Trailing Orbis Investment Management was Lyrical Asset Management, which amassed a stake valued at $383.1 million. MFN Partners, D E Shaw, and Spruce House Investment Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position 0 allocated the biggest weight to XPO Logistics Inc (NYSE:XPO), around 15.28% of its 13F portfolio. 0 is also relatively very bullish on the stock, earmarking 11.29 percent of its 13F equity portfolio to XPO.
Judging by the fact that XPO Logistics Inc (NYSE:XPO) has faced falling interest from the aggregate hedge fund industry, logic holds that there lies a certain “tier” of hedgies who sold off their positions entirely in the first quarter. Interestingly, Farallon Capital said goodbye to the biggest stake of the 750 funds followed by Insider Monkey, totaling close to $13.1 million in stock. John Brennan’s fund, Sirios Capital Management, also said goodbye to its stock, about $7.2 million worth. These moves are intriguing to say the least, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s now take a look at hedge fund activity in other stocks similar to XPO Logistics Inc (NYSE:XPO). These stocks are Snap-on Incorporated (NYSE:SNA), C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW), CenterPoint Energy, Inc. (NYSE:CNP), Shaw Communications Inc (NYSE:SJR), Nuance Communications Inc. (NASDAQ:NUAN), W.P. Carey Inc. (NYSE:WPC), and NortonLifeLock Inc. (NASDAQ:NLOK). All of these stocks’ market caps are similar to XPO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SNA | 18 | 431948 | -8 |
| CHRW | 23 | 359592 | -6 |
| CNP | 25 | 370742 | -5 |
| SJR | 21 | 384820 | 2 |
| NUAN | 57 | 4129595 | -3 |
| WPC | 23 | 162726 | 5 |
| NLOK | 32 | 1028034 | 3 |
| Average | 28.4 | 981065 | -1.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 28.4 hedge funds with bullish positions and the average amount invested in these stocks was $981 million. That figure was $2685 million in XPO’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 18 bullish hedge fund positions. XPO Logistics Inc (NYSE:XPO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XPO is 58.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Hedge funds were also right about betting on XPO as the stock returned 21.8% since the end of Q1 (through 6/25) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
