Five Transportation Stocks Billionaires Like

To find out whether a  stock is worth investing in, the easiest thing an investor can do is look at how many sophisticated investors back that company. That’s because when a lot of such investors are behind a stock, the chances of it outperforming increases substantially. At Insider Monkey, we track over 800 hedge funds, but pay special attention to the 58 hedge funds that were founded by or are run by billionaires because these investors usually identify opportunities in the equity markets well ahead of the crowd. Having said that, in this post, we will take a look at five stocks from the transportation sector that were owned by the maximum number of billionaire investors covered by us going into the second quarter.

We track prominent investors and hedge funds because our research has shown that historically their stock picks delivered superior risk-adjusted returns. This is especially true in the small-cap space. The 15 most popular small-cap stocks among a select group of investors delivered a monthly alpha of 80 basis points between 1999 and 2012 (see the details here).

#5 FedEx Corporation (NYSE:FDX)

– Billionaires with long positions (as of March 31): 8

– Aggregate value of billionaires’ holdings (as of March 31): $1.82 billion

First up is logistics giant FedEx Corporation (NYSE:FDX), whose ownership among funds managed by billionaires covered by us remained unchanged during the first quarter, but the aggregate value of their holdings increased by $120 million. Billionaires’ firms that increased their stake in the company during the first included Israel Englander’s Millennium Management, which brought up its holding  by 22% to 275,034 shares. The company came out with much better than expected numbers for its fiscal 2016 third quarter, which caused its stock to soar and owing largely to that it is currently trading up 7.23% year-to-date. FedEx Corporation (NYSE:FDX) is expected to report its fiscal 2016 fourth quarter numbers next week and the consensus among analysts is for it to report EPS of $3.29 on revenue of $12.78 billion. For the same quarter of the previous financial year, it had reported EPS of 42.66 on revenue of $12.11 billion.

#4 CSX Corporation (NASDAQ:CSX)

– Billionaires with long positions (as of March 31): 9

– Aggregate value of billionaires’ holdings (as of March 31): $4.97 billion

The number of billionaire investors long CSX Corporation (NASDAQ:CSX) remained constant during the first quarter. However, the aggregate value of their holdings in the company shot up by $300 million during the same time. After suffering a large drop in the second-half of 2015, CSX Corporation (NASDAQ:CSX)’s stock has largely been stable this year and currently trades up marginally, by 2.86%, for 2016. Most analysts feel that the stock is undervalued right now as it trades at a trailing P/E of 13.88, which is lower than its historical average trailing P/E and is also lower than the current average trailing P/E of 16.72 of the railroad industry. On June 10, analysts at BMO Capital Markets reiterated their ‘Buy’ rating on the stock. Billionaire trader Steve Cohen‘s Point72 Asset Management boosted its stake in CSX Corporation (NASDAQ:CSX) during the first quarter by 179% to 4.48 million shares.

#3 Canadian Pacific Railway Limited (USA) (NYSE:CP)

– Billionaires with long positions (as of March 31): 9

– Aggregate value of billionaires’ holdings (as of March 31): $2.617 billion

Like the two stocks mentioned above, Canadian Pacific Railway Limited (USA) (NYSE:CP)’s ownership among billionaire investors covered by us remained unchanged during the first quarter. But unlike them, the aggregate value of billionaires’ holdings in the company declined during the first quarter, by $190 million. The rally in commodity prices earlier this year helped Canadian Pacific Railway Limited (USA) (NYSE:CP)’s stock to move higher till mid-April. However, the stock has given up all of those gains ever since the company reported its first-quarter results and is now trading flat for the year. The company currently pays a quarterly dividend of $040 per share, which based on its last trading price translates into an annual dividend yield of 1.40%. Earlier this month, analysts at Morgan Stanley initiated their coverage on the stock with an ‘Overweight’ rating.  Billionaire Bill Ackman‘s Pershing Square didn’t make any changes to its stake of 13.94 million shares of Canadian Pacific Railway Limited during the first quarter and continued to remain the largest shareholder of the company among funds covered by us at the end of that period.

#2 Delta Air Lines, Inc. (NYSE:DAL)

– Billionaires with long positions (as of March 31): 11

– Aggregate value of billionaires’ holdings (as of March 31): $1.35 billion

Delta Air Lines, Inc. (NYSE:DAL) is the only stock in this list that saw its ownership among billionaire investors covered by us decline during the first quarter, albeit only by one. During the same period, the aggregate value of billionaires’ holding in the company came down by $300 million. Though Delta Air Lines, Inc. (NYSE:DAL)’s stock has lost 23% of its value so far in 2016, it is still one of the best performing stock in the airline industry in the past five years, boasting a return of 327.55% during that period. On June 8, while giving a presentation at Deutsche Bank Annual Global Industrials & Materials Summit Delta Air Lines’s CFO, Paul Jacobson, revealed that the company now expects passenger revenue per available seat mile to fall 4.5% year-over-year during its fiscal 2016 second quarter versus prior guidance of a decline between 2% and 4.5%. Billionaire Cliff Asness‘ AQR Capital Management boosted its holding in Delta Air Lines by one-third to 7.32 million shares during the first quarter.

#1 Southwest Airlines Co (NYSE:LUV)

– Billionaires with long positions (as of March 31): 12

– Aggregate value of billionaires’ holdings (as of March 31): $820.59 million

Southwest Airlines Co (NYSE:LUV) emerged as the favorite transportation stock among billionaire investors covered by us during the first quarter with its ownership among them rising by three and the aggregate value of their holdings in it increasing by $72.87 million. However, there were also a few billionaire-led firms that reduced their stake in the company during that time such as Ken Griffin‘s Citadel Investment Group, which lowered its holding by 59% to 845,617 shares. Shares of the airline holding company are currently trading down by 7.27% year-to-date, but are up by 17.58% in the last 12 months. The stock currently sports an average rating of ‘Overweight’ and an average price target of $54.70 from the 17 leading analysts on the Street who cover it.

Disclosure: None