Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 750 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about XPO Logistics Inc (NYSE:XPO).
Hedge fund interest in XPO Logistics Inc (NYSE:XPO) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare XPO to other stocks including BorgWarner Inc. (NYSE:BWA), Tyler Technologies, Inc. (NYSE:TYL), and Micro Focus Intl PLC (NYSE:MFGP) to get a better sense of its popularity.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We’re going to go over the fresh hedge fund action regarding XPO Logistics Inc (NYSE:XPO).
Hedge fund activity in XPO Logistics Inc (NYSE:XPO)
At Q4’s end, a total of 44 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in XPO over the last 14 quarters. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the biggest position in XPO Logistics Inc (NYSE:XPO). Orbis Investment Management has a $1.1607 billion position in the stock, comprising 8.4% of its 13F portfolio. The second largest stake is held by Spruce House Investment Management, managed by Zachary Sternberg and Benjamin Stein, which holds a $727.3 million position; 33.5% of its 13F portfolio is allocated to the company. Some other members of the smart money that hold long positions encompass Doug Silverman and Alexander Klabin’s Senator Investment Group, Israel Englander’s Millennium Management and Ken Griffin’s Citadel Investment Group.
Since XPO Logistics Inc (NYSE:XPO) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of funds who sold off their full holdings last quarter. Interestingly, David Tepper’s Appaloosa Management LP dumped the biggest investment of all the hedgies monitored by Insider Monkey, comprising about $154.1 million in stock. Joshua Kaufman and Craig Nerenberg’s fund, Brenner West Capital Partners, also dumped its stock, about $76.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s also examine hedge fund activity in other stocks similar to XPO Logistics Inc (NYSE:XPO). We will take a look at BorgWarner Inc. (NYSE:BWA), Tyler Technologies, Inc. (NYSE:TYL), Micro Focus Intl PLC (NYSE:MFGP), and SEI Investments Company (NASDAQ:SEIC). This group of 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 |
|---|---|---|---|
| BWA | 22 | 579935 | 0 |
| TYL | 24 | 714336 | 2 |
| MFGP | 8 | 9232 | -2 |
| SEIC | 25 | 287486 | 1 |
| Average | 19.75 | 397747 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $398 million. That figure was $2449 million in XPO’s case. SEI Investments Company (NASDAQ:SEIC) is the most popular stock in this table. On the other hand Micro Focus Intl PLC (NYSE:MFGP) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks XPO Logistics Inc (NYSE:XPO) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately XPO wasn’t in this group. Hedge funds that bet on XPO were disappointed as the stock returned 4.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
