Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards FedEx Corporation (NYSE:FDX) to find out whether there were any major changes in hedge funds’ views.
FedEx Corporation (NYSE:FDX) was in 61 hedge funds’ portfolios at the end of June. The all time high for this statistic is 71. FDX shareholders have witnessed a decrease in enthusiasm from smart money lately. There were 63 hedge funds in our database with FDX holdings at the end of March. Our calculations also showed that FDX isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Scott Bessent of Key Square Capital Management
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium 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 analyze the new hedge fund action encompassing FedEx Corporation (NYSE:FDX).
Do Hedge Funds Think FDX Is A Good Stock To Buy Now?
At second quarter’s end, a total of 61 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 46 hedge funds with a bullish position in FDX a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Among these funds, Citadel Investment Group held the most valuable stake in FedEx Corporation (NYSE:FDX), which was worth $463.2 million at the end of the second quarter. On the second spot was Bill & Melinda Gates Foundation Trust which amassed $445.6 million worth of shares. Southeastern Asset Management, Citadel Investment Group, and Millennium Management 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 7.81% of its 13F portfolio. Key Square Capital Management is also relatively very bullish on the stock, designating 5.49 percent of its 13F equity portfolio to FDX.
Since FedEx Corporation (NYSE:FDX) has experienced declining sentiment from the aggregate hedge fund industry, it’s safe to say that there is a sect of fund managers that slashed their entire stakes by the end of the second quarter. It’s worth mentioning that Ken Heebner’s Capital Growth Management said goodbye to the biggest position of the 750 funds followed by Insider Monkey, worth close to $29.8 million in stock. Brandon Haley’s fund, Holocene Advisors, also said goodbye to its stock, about $24.7 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the second quarter.
Let’s now review hedge fund activity in other stocks similar to FedEx Corporation (NYSE:FDX). These stocks are The Bank of Nova Scotia (NYSE:BNS), Mercadolibre Inc (NASDAQ:MELI), NetEase, Inc (NASDAQ:NTES), CME Group Inc (NASDAQ:CME), Dell Technologies Inc. (NYSE:DELL), Duke Energy Corporation (NYSE:DUK), and Canadian National Railway Company (NYSE:CNI). All of these stocks’ market caps are closest to FDX’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BNS | 14 | 223095 | -5 |
| MELI | 74 | 4024188 | 5 |
| NTES | 43 | 3720524 | 11 |
| CME | 62 | 2649845 | 2 |
| DELL | 62 | 5601143 | 8 |
| DUK | 36 | 566143 | 2 |
| CNI | 40 | 5310284 | 4 |
| Average | 47.3 | 3156460 | 3.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 47.3 hedge funds with bullish positions and the average amount invested in these stocks was $3156 million. That figure was $2170 million in FDX’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 14 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 67.9. 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 26.3% in 2021 through October 29th and beat the market again by 2.3 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 -20.8% since the end of June (through 10/29) 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.
