Were Hedge Funds Right About FedEx Corporation (FDX)?

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 900 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 FedEx Corporation (NYSE:FDX).

Hedge fund interest in FedEx Corporation (NYSE:FDX) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that FDX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). At the end of this article we will also compare FDX to other stocks including Zoetis Inc (NYSE:ZTS), Crown Castle International Corp. (REIT) (NYSE:CCI), and The PNC Financial Services Group, Inc. (NYSE:PNC) to get a better sense of its popularity.

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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a look at the fresh hedge fund action surrounding FedEx Corporation (NYSE:FDX).

Do Hedge Funds Think FDX Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 63 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. By comparison, 50 hedge funds held shares or bullish call options in FDX a year ago. So, let’s find out 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 $424.3 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $383.3 million worth of shares. AQR Capital Management, Southeastern Asset 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 12th Street Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 7.45% of its 13F portfolio. Stormborn Capital Management is also relatively very bullish on the stock, earmarking 5.51 percent of its 13F equity portfolio to FDX.

Since FedEx Corporation (NYSE:FDX) has witnessed falling interest from hedge fund managers, logic holds that there lies a certain “tier” of hedge funds that elected to cut their positions entirely by the end of the first quarter. Interestingly, Principal Global Investors’s Columbus Circle Investors dumped the biggest stake of all the hedgies monitored by Insider Monkey, comprising close to $14 million in stock, and Ryan Caldwell’s Chiron Investment Management was right behind this move, as the fund dumped about $13.7 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as FedEx Corporation (NYSE:FDX) but similarly valued. These stocks are Zoetis Inc (NYSE:ZTS), Crown Castle International Corp. (REIT) (NYSE:CCI), The PNC Financial Services Group, Inc. (NYSE:PNC), Duke Energy Corporation (NYSE:DUK), Enbridge Inc (NYSE:ENB), Mercadolibre Inc (NASDAQ:MELI), and CME Group Inc (NASDAQ:CME). All of these stocks’ market caps match FDX’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 46.4 hedge funds with bullish positions and the average amount invested in these stocks was $1987 million. That figure was $2264 million in FDX’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand Enbridge Inc (NYSE:ENB) is the least popular one with only 22 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 75.2. 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 25.8% in 2021 through August 6th and beat the market again by 6.7 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 -2.5% since the end of March (through 8/6) 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.

Suggested Articles:

• 15 Best Retail Stocks for 2021
• 10 Best Cryptocurrency Exchanges Of 2020
• 10 Best Safe Blue Chip Dividend Stocks

Disclosure: None. This article was originally published at Insider Monkey.