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Were Hedge Funds Right About Piling Into FedEx Corporation (FDX)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of FedEx Corporation (NYSE:FDX) based on that data and determine whether they were really smart about the stock.

Is FedEx Corporation (NYSE:FDX) a first-rate investment now? Prominent investors were getting more optimistic. The number of bullish hedge fund bets moved up by 5 recently. Our calculations also showed that FDX isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Martin Whitman Third Avenue Management Marty Whitman

Martin Whitman of Third Avenue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, this trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost gold prices. So, we are checking out this junior gold mining stock. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to analyze the key hedge fund action surrounding FedEx Corporation (NYSE:FDX).

How are hedge funds trading FedEx Corporation (NYSE:FDX)?

At Q1’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards FDX over the last 18 quarters. With hedge funds’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in FedEx Corporation (NYSE:FDX), which was worth $366.8 million at the end of the third quarter. On the second spot was Southeastern Asset Management which amassed $311.1 million worth of shares. Citadel Investment Group, Citadel Investment Group, 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 Southeastern Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 7.4% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, setting aside 7.15 percent of its 13F equity portfolio to FDX.

As one would reasonably expect, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in FedEx Corporation (NYSE:FDX). Point72 Asset Management had $31.8 million invested in the company at the end of the quarter. Kerr Neilson’s Platinum Asset Management also made a $29.8 million investment in the stock during the quarter. The following funds were also among the new FDX investors: Martin Whitman’s Third Avenue Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as FedEx Corporation (NYSE:FDX) but similarly valued. These stocks are Xcel Energy Inc (NASDAQ:XEL), Kinder Morgan Inc (NYSE:KMI), TAL Education Group (NYSE:TAL), and Ross Stores, Inc. (NASDAQ:ROST). This group of stocks’ market valuations resemble FDX’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
XEL 24 394426 9
KMI 47 947312 7
TAL 38 1801280 8
ROST 49 982341 1
Average 39.5 1031340 6.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 39.5 hedge funds with bullish positions and the average amount invested in these stocks was $1031 million. That figure was $1092 million in FDX’s case. Ross Stores, Inc. (NASDAQ:ROST) is the most popular stock in this table. On the other hand Xcel Energy Inc (NASDAQ:XEL) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks FedEx Corporation (NYSE:FDX) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th and still beat the market by 15.5 percentage points. Unfortunately FDX wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on FDX were disappointed as the stock returned 16.2% during the second quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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