The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May and August as this time China pivoted and Trump put more pressure on China by increasing tariffs. Fourth quarter brought optimism to the markets and hedge funds' top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 34.7% through November 22nd, vs. a gain of 26.2% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards FedEx Corporation (NYSE:FDX), and what that likely means for the prospects of the company and its stock.
Hedge fund interest in FedEx Corporation (NYSE:FDX) shares was flat at the end of last quarter. This is usually a negative indicator. The level and the change in hedge fund popularity aren't the only variables you need to analyze to decipher hedge funds' perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That's why at the end of this article we will examine companies such as National Grid plc (NYSE:NGG), Dell Technologies Inc. (NYSE:DELL), and Pinduoduo Inc. (NASDAQ:PDD) to gather more data points. Our calculations also showed that FDX isn't among the 30 most popular stocks among hedge funds.
In today’s marketplace there are a multitude of signals stock traders employ to grade their holdings. A couple of the less known signals are hedge fund and insider trading interest. Our researchers have shown that, historically, those who follow the top picks of the top investment managers can trounce the broader indices by a superb amount (see the details here).
[caption id="attachment_340075" align="aligncenter" width="450"] Mason Hawkins of Southeastern Asset Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a glance at the new hedge fund action surrounding FedEx Corporation (NYSE:FDX).
What have hedge funds been doing with FedEx Corporation (NYSE:FDX)?
At Q3's end, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in FDX over the last 17 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Bill & Melinda Gates Foundation Trust held the most valuable stake in FedEx Corporation (NYSE:FDX), which was worth $440.3 million at the end of the third quarter. On the second spot was Southeastern Asset Management which amassed $369.9 million worth of shares. Greenhaven Associates, Millennium Management, and Lakewood Capital Management 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 6.45% of its portfolio. Greenhaven Associates is also relatively very bullish on the stock, setting aside 3.33 percent of its 13F equity portfolio to FDX.
Judging by the fact that FedEx Corporation (NYSE:FDX) has witnessed a decline in interest from hedge fund managers, logic holds that there exists a select few hedgies who were dropping their full holdings in the third quarter. It's worth mentioning that Alexander Mitchell's Scopus Asset Management dumped the biggest investment of all the hedgies followed by Insider Monkey, valued at about $82.1 million in call options, and Mike Masters's Masters Capital Management was right behind this move, as the fund sold off about $82.1 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let's go over hedge fund activity in other stocks similar to FedEx Corporation (NYSE:FDX). These stocks are National Grid plc (NYSE:NGG), Dell Technologies Inc. (NYSE:DELL), Pinduoduo Inc. (NASDAQ:PDD), and Delta Air Lines, Inc. (NYSE:DAL). This group of stocks' market values are similar to FDX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NGG,10,534812,2 DELL,45,2444313,5 PDD,30,1435122,1 DAL,65,6996617,-5 Average,37.5,2852716,0.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $2853 million. That figure was $1369 million in FDX's case. Delta Air Lines, Inc. (NYSE:DAL) is the most popular stock in this table. On the other hand National Grid plc (NYSE:NGG) is the least popular one with only 10 bullish hedge fund positions. FedEx Corporation (NYSE:FDX) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on FDX, though not to the same extent, as the stock returned 7.5% during the fourth quarter (through 11/22) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.