Is XPO Logistics Stock A Buy or Sell?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about XPO Logistics Inc (NYSE:XPO).

Is XPO stock a buy or sell? Prominent investors were turning bullish. The number of long hedge fund bets went up by 1 recently. XPO Logistics Inc (NYSE:XPO) was in 40 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 47. Our calculations also showed that XPO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 39 hedge funds in our database with XPO positions at the end of the third quarter.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

David E. Shaw of D.E. Shaw

David E. Shaw of D.E. Shaw

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 10 best battery stocks to buy to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s take a look at the key hedge fund action regarding XPO Logistics Inc (NYSE:XPO).

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

At fourth quarter’s end, a total of 40 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. On the other hand, there were a total of 32 hedge funds with a bullish position in XPO a year ago. So, let’s see 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 XPO Logistics Inc (NYSE:XPO), which was worth $1666.4 million at the end of the fourth quarter. On the second spot was Spruce House Investment Management which amassed $461.7 million worth of shares. Lyrical Asset Management, MFN Partners, and D E Shaw 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 XPO Logistics Inc (NYSE:XPO), around 15.05% of its 13F portfolio. Spruce House Investment Management is also relatively very bullish on the stock, setting aside 14.13 percent of its 13F equity portfolio to XPO.

There weren’t any hedge funds initiating brand new positions in the stock during the fourth quarter.

Let’s also examine hedge fund activity in other stocks similar to XPO Logistics Inc (NYSE:XPO). These stocks are F5 Networks, Inc. (NASDAQ:FFIV), AbCellera Biologics Inc. (NASDAQ:ABCL), Universal Display Corporation (NASDAQ:OLED), Guidewire Software Inc (NYSE:GWRE), Pegasystems Inc. (NASDAQ:PEGA), LKQ Corporation (NASDAQ:LKQ), and Allegion plc (NYSE:ALLE). This group of stocks’ market values are similar to XPO’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FFIV 34 1131637 -2
ABCL 25 2316582 25
OLED 24 93963 4
GWRE 35 1577177 1
PEGA 32 2099135 0
LKQ 50 1611034 -1
ALLE 27 845921 -5
Average 32.4 1382207 3.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.4 hedge funds with bullish positions and the average amount invested in these stocks was $1382 million. That figure was $2981 million in XPO’s case. LKQ Corporation (NASDAQ:LKQ) is the most popular stock in this table. On the other hand Universal Display Corporation (NASDAQ:OLED) is the least popular one with only 24 bullish hedge fund positions. XPO Logistics Inc (NYSE:XPO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for XPO is 62.3. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on XPO, though not to the same extent, as the stock returned 4.7% since Q4 (through March 19th) and outperformed the market as well.

Follow Xpo Logistics Inc. (NYSE:XPO)

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