We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards FedEx Corporation (NYSE:FDX) and determine whether hedge funds skillfully traded this stock.
FedEx Corporation (NYSE:FDX) was in 46 hedge funds’ portfolios at the end of June. The all time high for this statistics is 53. FDX shareholders have witnessed a decrease in hedge fund interest lately. There were 50 hedge funds in our database with FDX positions at the end of the first quarter. Our calculations also showed that FDX isn’t among the 30 most popular stocks among hedge funds (click for Q2 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 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 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 scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding FedEx Corporation (NYSE:FDX).
What have hedge funds been doing with FedEx Corporation (NYSE:FDX)?
At the end of the second quarter, a total of 46 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -8% from one quarter earlier. By comparison, 40 hedge funds held shares or bullish call options in FDX a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in FedEx Corporation (NYSE:FDX), which was worth $424.2 million at the end of the third quarter. On the second spot was Southeastern Asset Management which amassed $295.8 million worth of shares. Citadel Investment Group, Greenhaven Associates, 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 Southeastern Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 7.38% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, earmarking 5.79 percent of its 13F equity portfolio to FDX.
Because FedEx Corporation (NYSE:FDX) has faced bearish sentiment from the smart money, we can see that there exists a select few money managers who sold off their positions entirely heading into Q3. At the top of the heap, Jacob Mitchell’s Antipodes Partners sold off the largest position of all the hedgies followed by Insider Monkey, valued at about $23.8 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund sold off about $23.4 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 4 funds heading into Q3.
Let’s also examine hedge fund activity in other stocks similar to FedEx Corporation (NYSE:FDX). We will take a look at L3Harris Technologies, Inc. (NASDAQ:LHX), Monster Beverage Corp (NASDAQ:MNST), General Motors Company (NYSE:GM), Exelon Corporation (NYSE:EXC), Veeva Systems Inc (NYSE:VEEV), Eaton Corporation plc (NYSE:ETN), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks’ market valuations match FDX’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LHX | 50 | 1312574 | 7 |
| MNST | 35 | 1880728 | -8 |
| GM | 69 | 4380069 | 16 |
| EXC | 30 | 772535 | -3 |
| VEEV | 35 | 529727 | 2 |
| ETN | 34 | 560308 | -1 |
| LVS | 47 | 2396746 | 5 |
| Average | 42.9 | 1690384 | 2.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.9 hedge funds with bullish positions and the average amount invested in these stocks was $1690 million. That figure was $1255 million in FDX’s case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Exelon Corporation (NYSE:EXC) is the least popular one with only 30 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 47.6. 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 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 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Hedge funds were also right about betting on FDX as the stock returned 56.8% since Q2 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.
