Is GXO Logistics Inc. (GXO) A Good Stock To Buy?

While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding GXO Logistics Inc. (NYSE:GXO).

Is GXO a good stock to buy now? The smart money was in an optimistic mood. The number of long hedge fund bets increased by 27 in recent months. GXO Logistics Inc. (NYSE:GXO) was in 27 hedge funds’ portfolios at the end of September. Our calculations also showed that GXO isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to review the recent hedge fund action encompassing GXO Logistics Inc. (NYSE:GXO).

Jeffrey Gates of Gates Capital

Do Hedge Funds Think GXO Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 27 from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards GXO over the last 25 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Orbis Investment Management held the most valuable stake in GXO Logistics Inc. (NYSE:GXO) , which was worth $838.5 million at the end of the third quarter. On the second spot was Lyrical Asset Management which amassed $154.8 million worth of shares. Gates Capital Management, Cardinal Capital, and Alyeska Investment Group 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 Lansing Management allocated the biggest weight to GXO Logistics Inc. (NYSE:GXO) , around 6.68% of its 13F portfolio. DSAM Partners is also relatively very bullish on the stock, dishing out 6.58 percent of its 13F equity portfolio to GXO.

As one would reasonably expect, key money managers were leading the bulls’ herd. Orbis Investment Management, managed by William B. Gray, initiated the most valuable position in GXO Logistics Inc. (NYSE:GXO) . Orbis Investment Management had $838.5 million invested in the company at the end of the quarter. Andrew Wellington and Jeff Keswin’s Lyrical Asset Management also made a $154.8 million investment in the stock during the quarter. The other funds with new positions in the stock are Jeffrey Gates’s Gates Capital Management, Amy Minella’s Cardinal Capital, and Anand Parekh’s Alyeska Investment Group.

Let’s go over hedge fund activity in other stocks similar to GXO Logistics Inc. (NYSE:GXO) . We will take a look at Crocs, Inc. (NASDAQ:CROX), First Horizon Corporation (NYSE:FHN), Juniper Networks, Inc. (NYSE:JNPR), Oatly Group AB (NASDAQ:OTLY), Dolby Laboratories, Inc. (NYSE:DLB), Genpact Limited (NYSE:G), and UGI Corp (NYSE:UGI). This group of stocks’ market values are closest to GXO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CROX 37 1051423 -3
FHN 24 103547 -3
JNPR 26 288397 -1
OTLY 13 136864 -6
DLB 33 521159 2
G 24 299354 2
UGI 20 128595 -3
Average 25.3 361334 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.3 hedge funds with bullish positions and the average amount invested in these stocks was $361 million. That figure was $1313 million in GXO’s case. Crocs, Inc. (NASDAQ:CROX) is the most popular stock in this table. On the other hand Oatly Group AB (NASDAQ:OTLY) is the least popular one with only 13 bullish hedge fund positions. GXO Logistics Inc. (NYSE:GXO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for GXO is 56.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 31.1% in 2021 through December 9th and still beat the market by 5.1 percentage points. Hedge funds were also right about betting on GXO as the stock returned 18.4% since the end of Q3 (through 12/9) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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