Were Hedge Funds Right About Warming Up To Expeditors International of Washington (EXPD)?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Expeditors International of Washington, Inc. (NASDAQ:EXPD)? The smart money sentiment can provide an answer to this question.

Expeditors International of Washington, Inc. (NASDAQ:EXPD) has experienced an increase in activity from the world’s largest hedge funds recently. Expeditors International of Washington, Inc. (NASDAQ:EXPD) was in 33 hedge funds’ portfolios at the end of June. The all time high for this statistics is 31. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that EXPD 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.

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’ 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 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Noam Gottesman of GLG Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Last week, most investors overlooked a major development because of the presidential elections: Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. 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. 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 website to get excerpts of these letters in your inbox. With all of this in mind let’s check out the new hedge fund action surrounding Expeditors International of Washington, Inc. (NASDAQ:EXPD).

What does smart money think about Expeditors International of Washington, Inc. (NASDAQ:EXPD)?

At second quarter’s end, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards EXPD over the last 20 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Select Equity Group was the largest shareholder of Expeditors International of Washington, Inc. (NASDAQ:EXPD), with a stake worth $168.1 million reported as of the end of June. Trailing Select Equity Group was AQR Capital Management, which amassed a stake valued at $79.8 million. Renaissance Technologies, GLG Partners, and Tensile Capital 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 Provenire Capital allocated the biggest weight to Expeditors International of Washington, Inc. (NASDAQ:EXPD), around 4.52% of its 13F portfolio. Tensile Capital is also relatively very bullish on the stock, setting aside 2.38 percent of its 13F equity portfolio to EXPD.

As one would reasonably expect, specific money managers were breaking ground themselves. Provenire Capital, managed by Anthony S. Daffer, assembled the largest position in Expeditors International of Washington, Inc. (NASDAQ:EXPD). Provenire Capital had $4.9 million invested in the company at the end of the quarter. Michael Gelband’s ExodusPoint Capital also initiated a $4.1 million position during the quarter. The other funds with new positions in the stock are Jeffrey Talpins’s Element Capital Management, Parvinder Thiara’s Athanor Capital, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s now review hedge fund activity in other stocks similar to Expeditors International of Washington, Inc. (NASDAQ:EXPD). We will take a look at Qorvo Inc (NASDAQ:QRVO), Etsy Inc (NASDAQ:ETSY), Genuine Parts Company (NYSE:GPC), Sarepta Therapeutics Inc (NASDAQ:SRPT), Hewlett Packard Enterprise Company (NYSE:HPE), Grifols SA (NASDAQ:GRFS), and Nucor Corporation (NYSE:NUE). All of these stocks’ market caps are closest to EXPD’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $860 million. That figure was $443 million in EXPD’s case. Qorvo Inc (NASDAQ:QRVO) is the most popular stock in this table. On the other hand Genuine Parts Company (NYSE:GPC) is the least popular one with only 20 bullish hedge fund positions. Expeditors International of Washington, Inc. (NASDAQ:EXPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EXPD is 58. 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 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. A small number of hedge funds were also right about betting on EXPD as the stock returned 16.2% since the end of the second quarter (through 10/30) and outperformed the market by an even larger margin.

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