In this article we will check out the progression of hedge fund sentiment towards FedEx Corporation (NYSE:FDX) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
FedEx Corporation (NYSE:FDX) investors should pay attention to an increase in support from the world’s most elite money managers of late. FDX was in 50 hedge funds’ portfolios at the end of March. There were 45 hedge funds in our database with FDX holdings at the end of the previous quarter. Our calculations also showed that FDX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Mason Hawkins of Southeastern Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this successful trader’s “corona catalyst plays“. Also, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s take a look at the new hedge fund action regarding FedEx Corporation (NYSE:FDX).
How have hedgies been trading FedEx Corporation (NYSE:FDX)?
At Q1’s end, a total of 50 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the fourth quarter of 2019. By comparison, 41 hedge funds held shares or bullish call options in FDX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in FedEx Corporation (NYSE:FDX), which was worth $366.8 million at the end of the third quarter. On the second spot was Southeastern Asset Management which amassed $311.1 million worth of shares. Citadel Investment Group, Citadel Investment Group, and D E Shaw 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 Southeastern Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 7.4% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, dishing out 7.15 percent of its 13F equity portfolio to FDX.
As aggregate interest increased, specific money managers were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, assembled the most valuable position in FedEx Corporation (NYSE:FDX). Point72 Asset Management had $31.8 million invested in the company at the end of the quarter. Kerr Neilson’s Platinum Asset Management also made a $29.8 million investment in the stock during the quarter. The other funds with brand new FDX positions are Martin Whitman’s Third Avenue Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as FedEx Corporation (NYSE:FDX) but similarly valued. These stocks are Xcel Energy Inc (NYSE:XEL), Kinder Morgan Inc (NYSE:KMI), TAL Education Group, Inc. (NYSE:TAL), and Ross Stores, Inc. (NASDAQ:ROST). This group of stocks’ market caps match FDX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XEL | 24 | 394426 | 9 |
| KMI | 47 | 947312 | 7 |
| TAL | 38 | 1801280 | 8 |
| ROST | 49 | 982341 | 1 |
| Average | 39.5 | 1031340 | 6.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1031 million. That figure was $1092 million in FDX’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand Xcel Energy Inc (NYSE:XEL) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks FedEx Corporation (NYSE:FDX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately FDX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FDX were disappointed as the stock returned -3.5% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.
