Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space. Nevertheless, it is also possible to identify cheap large cap stocks by following the footsteps of best performing hedge funds. In this article we are going to take a look at smart money sentiment towards Expeditors International of Washington, Inc. (NASDAQ:EXPD).
Is Expeditors International of Washington, Inc. (NASDAQ:EXPD) ready to rally soon? Prominent investors are in an optimistic mood. The number of bullish hedge fund positions increased by 2 in recent months. 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 at the end of this article for Q2 rankings). EXPD was in 27 hedge funds' portfolios at the end of the third quarter of 2019. There were 25 hedge funds in our database with EXPD positions at the end of the previous quarter.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
[caption id="attachment_26794" align="aligncenter" width="359"] Paul Tudor Jones of Tudor Investment Corp[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock is still extremely cheap despite already gaining 20 percent. Keeping this in mind let's go over the key hedge fund action encompassing Expeditors International of Washington, Inc. (NASDAQ:EXPD).
What does smart money think about Expeditors International of Washington, Inc. (NASDAQ:EXPD)?
At Q3's end, a total of 27 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 8% from the second quarter of 2019. Below, you can check out the change in hedge fund sentiment towards EXPD over the last 17 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Expeditors International of Washington, Inc. (NASDAQ:EXPD), which was worth $53.6 million at the end of the third quarter. On the second spot was Tensile Capital which amassed $45.1 million worth of shares. D E Shaw, AQR Capital Management, and Citadel 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 Tensile Capital allocated the biggest weight to Expeditors International of Washington, Inc. (NASDAQ:EXPD), around 5.72% of its 13F portfolio. PDT Partners is also relatively very bullish on the stock, dishing out 0.53 percent of its 13F equity portfolio to EXPD.
With a general bullishness amongst the heavyweights, specific money managers have been driving this bullishness. Paloma Partners, managed by Donald Sussman, created the most outsized position in Expeditors International of Washington, Inc. (NASDAQ:EXPD). Paloma Partners had $3.6 million invested in the company at the end of the quarter. Brad Dunkley and Blair Levinsky's Waratah Capital Advisors also made a $0.8 million investment in the stock during the quarter. The other funds with brand new EXPD positions are Paul Tudor Jones's Tudor Investment Corp, John Brandmeyer's Cognios Capital, and Minhua Zhang's Weld Capital Management.
Let's now review hedge fund activity in other stocks similar to Expeditors International of Washington, Inc. (NASDAQ:EXPD). These stocks are Citrix Systems, Inc. (NASDAQ:CTXS), Host Hotels and Resorts Inc (NYSE:HST), The J.M. Smucker Company (NYSE:SJM), and Tenaris S.A. (NYSE:TS). All of these stocks' market caps are similar to EXPD's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CTXS,27,1658692,-7 HST,27,594453,-1 SJM,26,453856,0 TS,11,412435,-5 Average,22.75,779859,-3.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.75 hedge funds with bullish positions and the average amount invested in these stocks was $780 million. That figure was $361 million in EXPD's case. Citrix Systems, Inc. (NASDAQ:CTXS) is the most popular stock in this table. On the other hand Tenaris S.A. (NYSE:TS) is the least popular one with only 11 bullish hedge fund positions. Expeditors International of Washington, Inc. (NASDAQ:EXPD) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but 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 10.1 percentage points. Unfortunately EXPD wasn't nearly as popular as these 20 stocks and hedge funds that were betting on EXPD were disappointed as the stock returned 16.2% in 2019 and trailed 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.