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Is EXPD A Good Stock To Buy According To Hedge Funds?

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  • EXPD

We at Insider Monkey have gone over 817 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds' and investors' portfolio positions as of September 30th. In this article, we look at what those funds think of Expeditors International of Washington, Inc. (NASDAQ:EXPD) based on that data.

Is EXPD a good stock to buy? Expeditors International of Washington, Inc. (NASDAQ:EXPD) investors should pay attention to a decrease in enthusiasm from smart money of late. Expeditors International of Washington, Inc. (NASDAQ:EXPD) was in 31 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 33. There were 33 hedge funds in our database with EXPD holdings at the end of June. Our calculations also showed that EXPD isn't among the 30 most popular stocks among hedge funds (click for Q3 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.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 66 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.

Mark Kingdon - Kingdon Capital
Mark Kingdon - Kingdon Capital

Mark Kingdon of Kingdon Capital

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 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 analyze the new hedge fund action regarding Expeditors International of Washington, Inc. (NASDAQ:EXPD).

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

At Q3's end, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from one quarter earlier. By comparison, 30 hedge funds held shares or bullish call options in EXPD a year ago. With hedge funds' capital changing hands, there exists a select group of noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

The largest stake in Expeditors International of Washington, Inc. (NASDAQ:EXPD) was held by AQR Capital Management, which reported holding $128.2 million worth of stock at the end of September. It was followed by Select Equity Group with a $125.9 million position. Other investors bullish on the company included Renaissance Technologies, GLG Partners, and Millennium Management. In terms of the portfolio weights assigned to each position Tensile Capital allocated the biggest weight to Expeditors International of Washington, Inc. (NASDAQ:EXPD), around 1.65% of its 13F portfolio. Arjuna Capital is also relatively very bullish on the stock, dishing out 1.21 percent of its 13F equity portfolio to EXPD.

Since Expeditors International of Washington, Inc. (NASDAQ:EXPD) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there were a few hedge funds who sold off their entire stakes by the end of the third quarter. Intriguingly, Parvinder Thiara's Athanor Capital dropped the largest stake of all the hedgies tracked by Insider Monkey, worth an estimated $2.8 million in stock. Ryan Tolkin (CIO)'s fund, Schonfeld Strategic Advisors, also sold off its stock, about $2.4 million worth. These moves are important to note, as total hedge fund interest fell by 2 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks similar to Expeditors International of Washington, Inc. (NASDAQ:EXPD). We will take a look at Ryanair Holdings plc (NASDAQ:RYAAY), Xylem Inc (NYSE:XYL), NVR, Inc. (NYSE:NVR), CarMax Inc (NYSE:KMX), Altice USA, Inc. (NYSE:ATUS), Steris Plc (NYSE:STE), and Ingersoll Rand Inc. (NYSE:IR). This group of stocks' market caps resemble EXPD's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RYAAY,16,659788,-5 XYL,21,592977,-1 NVR,42,1141650,3 KMX,54,1449835,8 ATUS,62,3526439,5 STE,30,676397,-10 IR,26,758110,-5 Average,35.9,1257885,-0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.9 hedge funds with bullish positions and the average amount invested in these stocks was $1258 million. That figure was $529 million in EXPD's case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 16 bullish hedge fund positions. Expeditors International of Washington, Inc. (NASDAQ:EXPD) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for EXPD is 47.5. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 33.3% in 2020 through December 18th and surpassed the market again by 16.4 percentage points. Unfortunately EXPD wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); EXPD investors were disappointed as the stock returned 6% since the end of September (through 12/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 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.

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