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5 Ways Hedge Funds Are Playing the Last Mile

In e-commerce, the last mile is generally regarded as the final leg of a package’s journey to a customer’s home. Given that most customers are disbursed, delivery to the last mile is typically more expensive per mile than delivery from a factory to a distribution center. As technology has advanced, the battle for the ‘last mile’ is considered very important as faster and cheaper ‘last mile’ delivery can give the upper hand to e-commerce providers. Whoever offers the cheapest and fastest solution for the ‘last mile’ can get more customers, and whoever has more customers can realize greater profits and sales. In this article, let’s analyze five stocks with ‘last mile’ exposure that hedge funds and other smart money funds are in.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Amazon.com (NASDAQ:AMZN), The Washington Post (NYSE:WPO), Berkshire Hathaway Inc. (NYSE:BRK.A), Apple Inc. (NASDAQ:AAPL)

Note we track around 700-740 top elite funds overall.

Amazon.com, Inc. (NASDAQ:AMZN)

Jeff Bezos’ Amazon isn’t known for being a big player in the ‘last mile’, but it might soon be. The company is increasingly in-housing its logistics to save money and to better control the overall user experience. Amazon has announced Amazon Prime one day prime shipping, which makes Amazon working on cost effective ‘last mile’ delivery all the more important. In terms of its last mile efforts, Amazon has worked on drones, and has launched an autonomous delivery service termed Scout as an experiment. It will no doubt use the latest technology in the future to efficiently provide its customers with the best experience. Of the around 700-740 elite funds we track, 168 funds owned $19.02 billion of Amazon.com, Inc. (NASDAQ:AMZN) on December 31, versus 150 funds and $21.77 billion respectively on September 30.

Walmart Inc. (NYSE:WMT)

Like Amazon, Walmart isn’t known for being a logistics company. It’s a big retailer instead, with with over half a trillion in annual revenue with the majority from physical retail. Despite not being in the field, Wal-Mart has some advantages as around 90% of Americans live within 15 miles of a Wal-Mart store. Given its locations, Wal-Mart can offer grocery pickup in addition to delivery, and it’s working with automaker Ford on an autonomous delivery experiment to solve the last mile. The number of elite funds with holdings in Walmart Inc. (NYSE:WMT) rose by 3 quarter-over-quarter to 63 at the end of December.

XPO Logistics Inc (NYSE:XPO)

XPO is the ‘largest provider of last mile logistics for heavy goods in North America’. The company arranges around 40,000 last mile delivery per day on average and has 85 last mile hubs in North America. Although the stock hasn’t done well in the last four quarters due to rumors that potential top customer Amazon may have gone elsewhere, XPO has a buyback program and sentiment has improved. 44 top funds had a bullish position in XPO Logistics Inc (NYSE:XPO) at the end of December.

FedEx Corporation (NYSE:FDX) is a last mile provider, and the company has developed an autonomous delivery robot dubbed the ‘FedEx SameDay Bot’ for part of the job. With the bot, retail partners of FeEx can accept orders and deliver those orders by bot directly to businesses or homes. According to the company,”the FedEx bot is designed to travel on sidewalks and along roadsides, safely delivering smaller shipments to customers’ homes and businesses. Bot features include pedestrian-safe technology from the iBot, plus advanced technology such as LiDAR and multiple cameras, allowing the zero-emission, battery-powered bot to be aware of its surroundings”.

41 elite funds had a bullish position in FedEx Corporation (NYSE:FDX) as of the most recent 13-F reporting period, down 1 funds from the previous quarter.

United Parcel Service, Inc. (NYSE:UPS)

Like FedEx, UPS is a big last mile provider and the company could lose out on some business if Amazon in-houses more of its logistics efforts. The smart money is slightly more cautious on UPS according to our data. Of the around 700-740 elite funds we track, 32 funds owned $1.16 billion of United Parcel Service, Inc. (NYSE:UPS) on December 31, versus 31 funds and $1.91 billion respectively on September 30.

Disclosure:none

 

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