Does Bill Ackman Have FedEx Corporation (FDX) in His Sights?

FedEx Corporation (NYSE:FDX) has outperformed the market this week, rising from around $99 at the end of last week to highs above $106. The main justification for this rise has been rampant speculation about whether FedEx stock will be the next target of hedge-fund manager Bill Ackman, who has had many high-profile “activist” investments, including successful runs at McDonald’s Corporation (NYSE:MCD) and General Growth Properties Inc (NYSE:GGP) along with underperforming investments in Target Corporation (NYSE:TGT) and J.C. Penney Company, Inc. (NYSE:JCP).

I have no inside information on whether Ackman really is interested in FedEx. However, while having an activist investor onboard could help accelerate FedEx Corporation (NYSE:FDX)’s restructuring and unlock more value for shareholders, FedEx stock is likely to outperform the market over the next few years even if Ackman isn’t involved. Shareholders may have a wild ride for the next few months, but long-term investors are likely to do well with FedEx Corporation (NYSE:FDX), regardless of the short-term gyrations.

Activist speculation
On Monday, activist investor Bill Ackman — who runs Pershing Square Capital Management — announced that he was launching a new $1 billion fund to invest in an unnamed large-cap American company. According to a letter sent to potential investors by Ackman, the business is “simple, predictable, and free-cash-flow-generative and enjoys high barriers to entry.” These are all hallmarks of a great investment opportunity.

Not surprisingly, investors and the financial press immediately began trying to identify Ackman’s most likely targets. By Tuesday, two names were getting most of the attention: FedEx Corporation (NYSE:FDX) and security firm ADT Corp (NYSE:ADT). Both seemed to fit most of the criteria Ackman identified.

That said, neither match is perfect, and some analysts have argued strenuously that Ackman probably isn’t buying FedEx stock. While the air cargo market has high barriers to entry, there is still plenty of competition between FedEx Corporation (NYSE:FDX), United Parcel Service, Inc. (NYSE:UPS), DHL, and others. The other criteria are also vague enough to leave plenty of doubt about Ackman’s plans.

Does it really matter?
When all is said and done, investors shouldn’t lose any sleep wondering whether Ackman has been loading up on FedEx stock. The company remains healthy, which is the most important thing for investors. Of its two main businesses, FedEx Corporation (NYSE:FDX) Ground has been growing rapidly for a long time, becoming a viable competitor to UPS in the process. FedEx Ground has gained market share for an amazing 54 consecutive quarters! That growth is expected to continue, particularly because of the rise of e-commerce.