Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 of 2018 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETFs by nearly 10 percentage points during the first 11 months of 2019. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at Expeditors International of Washington, Inc. (NASDAQ:EXPD) from the perspective of those elite funds.
Is Expeditors International of Washington, Inc. (NASDAQ:EXPD) a bargain? Investors who are in the know are betting on the stock. The number of long hedge fund positions advanced by 2 lately. Our calculations also showed that EXPD isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Blair Levinsky of Waratah Capital Advisors
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the new hedge fund action encompassing Expeditors International of Washington, Inc. (NASDAQ:EXPD).
How are hedge funds trading Expeditors International of Washington, Inc. (NASDAQ:EXPD)?
At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in EXPD a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Expeditors International of Washington, Inc. (NASDAQ:EXPD), which was worth $53.6 million at the end of the third quarter. On the second spot was Tensile Capital which amassed $45.1 million worth of shares. D E Shaw, AQR Capital Management, and Citadel Investment Group 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 Tensile Capital allocated the biggest weight to Expeditors International of Washington, Inc. (NASDAQ:EXPD), around 5.72% of its portfolio. PDT Partners is also relatively very bullish on the stock, designating 0.53 percent of its 13F equity portfolio to EXPD.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Paloma Partners, managed by Donald Sussman, created the most outsized position in Expeditors International of Washington, Inc. (NASDAQ:EXPD). Paloma Partners had $3.6 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky’s Waratah Capital Advisors also made a $0.8 million investment in the stock during the quarter. The following funds were also among the new EXPD investors: Paul Tudor Jones’s Tudor Investment Corp, John Brandmeyer’s Cognios Capital, and Minhua Zhang’s Weld Capital Management.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Expeditors International of Washington, Inc. (NASDAQ:EXPD) but similarly valued. We will take a look at Citrix Systems, Inc. (NASDAQ:CTXS), Host Hotels and Resorts Inc (NYSE:HST), The J.M. Smucker Company (NYSE:SJM), and Tenaris S.A. (NYSE:TS). This group of stocks’ market valuations are similar to EXPD’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CTXS | 27 | 1658692 | -7 |
| HST | 27 | 594453 | -1 |
| SJM | 26 | 453856 | 0 |
| TS | 11 | 412435 | -5 |
| Average | 22.75 | 779859 | -3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $361 million in EXPD’s case. Citrix Systems, Inc. (NASDAQ:CTXS) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 11 bullish hedge fund positions. Expeditors International of Washington, Inc. (NASDAQ:EXPD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately EXPD wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on EXPD were disappointed as the stock returned 0.6% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
