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Is FedEx Corp (FDX) a Smart Long-term Buy?

Alex Smith
·4 min read

Cartenna Capital recently released its Q3 2020 Investor Letter, a copy of which you can download here. The fund posted a return of 5.6% for the third quarter, underperforming its benchmark, the S&P 500 Index which returned 8.93% in the same quarter. You should check out Cartenna Capital's top 5 stock picks for investors to buy right now, which could be the biggest winners of 2021.

In the Q3 2020 Investor Letter, Cartenna Capital highlighted a few stocks and FedEx Corp (NYSE:FDX) is one of them. FedEx Corp (NYSE:FDX) is a delivery services company. Year-to-date, FedEx Corp (NYSE:FDX) stock gained 77.8% and on December 24th it had a closing price of $268.82. Here is what Cartenna Capital said:

"FedEx Corporation ("FDX") was the Fund's largest positive contributor to performance during Q3, and we remain very bullish on the entire parcel sector into Q4. When we initially purchased shares of FedEx, it represented an extremely attractive idiosyncratic opportunity embedded within our constructive transportation market outlook. For the past several years, we have generally held a negative bias on FedEx operations as they have routinely suffered from both macroeconomic headwinds (US-China trade war) and company specific issues that have been self-inflicted (i.e. lost Amazon as a customer, poor TNT acquisition/ransomware attack). However, as FedEx began their Fiscal Year 2021 in June, many of these headwinds were poised to reverse and become tailwinds. First, capacity utilization across transportation supply chains was (and still is) very high, stemming from a Covid-19 induced inflection in ecommerce spending. This dynamic has led to increased pricing power for parcel delivery services. Second, we believed that newfound capital discipline at both UPS and FedEx would allow this tight market to last for an extended period. More specifically, FDX changed their executive compensation in Fiscal Years 2021-2023 to include a 25% weighting that incentivizes capital expenditures to remain near 6% of revenue, a meaningful reduction from elevated spending in recent years. Similarly, the legendary Carol Tome came out of retirement to run UPS and used the July earnings calls to highlight capital discipline by repeatedly saying "it's all about being better, not bigger." Third, in Europe, FedEx recently achieved interoperability between its FedEx and TNT networks. This will allow for the two sub-scale networks to combine and achieve meaningful profit improvement. The three tailwinds cited above are just a few that we have selected from a long list of both industry and company-specific reasons to be excited about FedEx (and UPS). We have taken some profits recently but will look to build back our stake in FDX as opportunity arises."

Fedex FDX
Fedex FDX

Earlier this month, we published an article revealing that Longleaf Partners Fund, a Memphis-based fund under Southeastern Asset Management, is also bullish on FedEx Corp (NYSE:FDX) stock. The investment firm believes that the company has massive upside ahead.

In Q3 2020, the number of bullish hedge fund positions on FedEx Corp (NYSE:FDX) stock increased by about 54% from the previous quarter (see the chart here), so a number of other hedge fund managers believe in FedEx's growth potential. Our calculations showed that FedEx Corp (NYSE:FDX) isn't ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 216% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 121 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds' poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, 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 real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world 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:

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