Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards FedEx Corporation (NYSE:FDX).
FedEx Corporation (NYSE:FDX) was in 49 hedge funds’ portfolios at the end of September. The all time high for this statistic is 71. FDX investors should pay attention to a decrease in hedge fund sentiment lately. There were 61 hedge funds in our database with FDX positions at the end of the second quarter. Our calculations also showed that FDX isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to analyze the recent hedge fund action regarding FedEx Corporation (NYSE:FDX).
Michael Gelband of ExodusPoint Capital
Do Hedge Funds Think FDX Is A Good Stock To Buy Now?
At Q3’s end, a total of 49 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FDX over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in FedEx Corporation (NYSE:FDX), which was worth $569.1 million at the end of the third quarter. On the second spot was Bill & Melinda Gates Foundation Trust which amassed $327.6 million worth of shares. Southeastern Asset Management, D E Shaw, and Renaissance Technologies 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 12th Street Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 6.09% of its 13F portfolio. Trellus Management Company is also relatively very bullish on the stock, designating 4.79 percent of its 13F equity portfolio to FDX.
Due to the fact that FedEx Corporation (NYSE:FDX) has experienced a decline in interest from hedge fund managers, logic holds that there was a specific group of money managers that slashed their entire stakes heading into Q4. Intriguingly, Jack Woodruff’s Candlestick Capital Management said goodbye to the largest investment of all the hedgies monitored by Insider Monkey, comprising close to $74.6 million in call options. Benjamin A. Smith’s fund, Laurion Capital Management, also said goodbye to its call options, about $58.9 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 12 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FedEx Corporation (NYSE:FDX) but similarly valued. We will take a look at América Móvil, S.A.B. de C.V. (NYSE:AMOV), Northrop Grumman Corporation (NYSE:NOC), NetEase, Inc (NASDAQ:NTES), Air Products & Chemicals, Inc. (NYSE:APD), Ford Motor Company (NYSE:F), ING Groep N.V. (NYSE:ING), and Twilio Inc. (NYSE:TWLO). This group of stocks’ market valuations are closest to FDX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AMOV | 1 | 300 | 0 |
| NOC | 29 | 910523 | -13 |
| NTES | 32 | 2326768 | -11 |
| APD | 32 | 528730 | -8 |
| F | 51 | 1642491 | -4 |
| ING | 8 | 693351 | -1 |
| TWLO | 96 | 6369513 | -2 |
| Average | 35.6 | 1781668 | -5.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.6 hedge funds with bullish positions and the average amount invested in these stocks was $1782 million. That figure was $1682 million in FDX’s case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand América Móvil, S.A.B. de C.V. (NYSE:AMOV) is the least popular one with only 1 bullish hedge fund positions. FedEx Corporation (NYSE:FDX) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for FDX is 39. 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. 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 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 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately FDX wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on FDX were disappointed as the stock returned 5.1% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
Follow Fedex Corp (NYSE:FDX)
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Disclosure: None. This article was originally published at Insider Monkey.
