Why Chesapeake, Wal-Mart Stores, Amazon, UPS, and FedEx Are in Spotlight Today

Traders are awaiting today’s EIA report after yesterday’s API data showed that inventories falling 0.75 million barrels last week versus expectations of a 2.5 million barrel increase.

In this article, we analyze why investors talking about five stocks, Chesapeake Energy Corporation (NYSE:CHK), Wal-Mart Stores, Inc. (NYSE:WMT), Amazon.com, Inc. (NASDAQ:AMZN), United Parcel Service, Inc. (NYSE:UPS), and FedEx Corporation (NYSE:FDX). We also find out how the smart money investors in our database of 749 funds feel about these stocks.

We believe that imitating hedge funds and other large institutional investors can be helpful in identifying stocks capable of outperforming the broader market. Through extensive research that covered portfolios of several hundred large investors between 1999 and 2012, we determined that following the small-cap stocks that large money managers are collectively bullish on, can generate monthly returns nearly 1.0 percentage points above the market (see the details here).

Chesapeake Energy Corporation (NYSE:CHK) shares are trending after Carl Icahn’s Icahn Capital LP filed to sell another 15 million shares of the company (according to a Form 144), with UBS being the book runner. Icahn had previously pared his stake by 37.7 million shares to 35.3 million shares in a move that Icahn termed as for ‘tax planning’ purposes. According to our database, 31 funds owned shares of Chesapeake Energy Corporation (NYSE:CHK) at the end of June, unchanged from the previous quarter.

Traders are talking about Wal-Mart Stores, Inc. (NYSE:WMT) after Financial Times reported that the retailing giant is in preliminary talks for potentially buying a stake in Flipkart, which is, in many ways, an Indian version of Amazon.com. If it buys a stake, Wal-Mart would be beefing up its e-commerce presence abroad and would take the battle with Amazon.com to India as well. Wal-Mart previously shelled out over $3 billion to buy e-commerce startup Jet.com. Warren Buffett’s Berkshire Hathaway owned over 40 million shares of Wal-Mart Stores, Inc. (NYSE:WMT) at the end of June, down by 28% over the quarter.

On the next page, we examine why Amazon.com, United Parcel Service, and FedEx Corporation are each trending.

Amazon.com, Inc. (NASDAQ:AMZN) is in the spotlight after The Wall Street Journal reported that the company is planning to eventually build a logistics package delivery operation both for itself and for other retailers. In the effort termed’ Consume the City’, Amazon hopes to offer delivery options to consumers and companies that current logistics providers don’t offer such as more delivery times. Therefore, Amazon intends to increase its efficiency and the total market size of the logistics business is very attractive for a company as big as Amazon. According to the financial firm Baird, the world-wide delivery market generates around $400 billion in annual sales for various companies, with FedEx Corporation (NYSE:FDX) and United Parcel Service, Inc. (NYSE:UPS) leading the list. Although Amazon won’t be a threat to the two in the short term, the e-commerce giant will certainly be a long-term threat to both FedEx and UPS given Amazon’s long term thinking and its extensive financial resources.

Amazon, for its part, has insisted that its operations are just a supplement to existing providers:

“We are very happy to have the delivery capacity our carrier partners can provide. They provide a high quality service, and our own delivery efforts are needed to supplement that capacity rather than replace it.”

However, according to the Journal, executives are being a little bit more ambitious, ‘describing the company as building a full-service logistics and transportation network effectively from the ground up’. Amazon.com, Inc. (NASDAQ:AMZN) was one of the most popular stocks among the funds we track, with 145 funds reporting stakes as of the end of June. Meanwhile, 33 funds held shares of United Parcel Service, Inc. (NYSE:UPS) and 46 funds were long FedEx Corporation (NYSE:FDX) at the end of the second quarter.

Disclosure: None