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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in FedEx Corporation (NYSE:FDX)? The smart money sentiment can provide an answer to this question.
Is FDX stock a buy or sell? FedEx Corporation (NYSE:FDX) was in 63 hedge funds' portfolios at the end of December. The all time high for this statistic is 71. FDX shareholders have witnessed a decrease in hedge fund interest in recent months. There were 71 hedge funds in our database with FDX positions at the end of the third quarter. Our calculations also showed that FDX isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings).
In the 21st century investor’s toolkit there are a lot of signals market participants can use to grade publicly traded companies. Two of the less utilized signals are hedge fund and insider trading signals. We have shown that, historically, those who follow the best picks of the elite fund managers can outpace their index-focused peers by a healthy margin (see the details here).
Mason Hawkins of Southeastern Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock that will deliver a 10x return. 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 homepage (or at the end of this article). Now let's take a gander at the new hedge fund action encompassing FedEx Corporation (NYSE:FDX).
Do Hedge Funds Think FDX Is A Good Stock To Buy Now?
At fourth quarter's end, a total of 63 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards FDX over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Michael Larson's Bill & Melinda Gates Foundation Trust has the number one position in FedEx Corporation (NYSE:FDX), worth close to $785.4 million, comprising 3.5% of its total 13F portfolio. Sitting at the No. 2 spot is Southeastern Asset Management, led by Mason Hawkins, holding a $229.9 million position; the fund has 5.1% of its 13F portfolio invested in the stock. Other peers that are bullish encompass Kerr Neilson's Platinum Asset Management, Cliff Asness's AQR Capital Management and Jack Woodruff's Candlestick Capital Management. In terms of the portfolio weights assigned to each position 12th Street Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 6.98% of its 13F portfolio. Southeastern Asset Management is also relatively very bullish on the stock, dishing out 5.13 percent of its 13F equity portfolio to FDX.
Because FedEx Corporation (NYSE:FDX) has faced falling interest from the smart money, it's safe to say that there exists a select few funds who were dropping their full holdings heading into Q1. Interestingly, Alexander Mitchell's Scopus Asset Management dropped the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $92.7 million in stock, and Louis Bacon's Moore Global Investments was right behind this move, as the fund dropped about $73.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 8 funds heading into Q1.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as FedEx Corporation (NYSE:FDX) but similarly valued. We will take a look at Crown Castle International Corp. (REIT) (NYSE:CCI), Lam Research Corporation (NASDAQ:LRCX), Duke Energy Corporation (NYSE:DUK), Autodesk, Inc. (NASDAQ:ADSK), The Sherwin-Williams Company (NYSE:SHW), The Bank of Nova Scotia (NYSE:BNS), and CME Group Inc (NASDAQ:CME). 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 CCI,40,2071704,-2 LRCX,56,2619776,1 DUK,38,614751,2 ADSK,66,3528315,1 SHW,49,1881345,-6 BNS,19,336708,5 CME,58,2275518,-1 Average,46.6,1904017,0 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 46.6 hedge funds with bullish positions and the average amount invested in these stocks was $1904 million. That figure was $2012 million in FDX's case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 19 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 overall hedge fund sentiment score for FDX is 70.4. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on FDX as the stock returned 8% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.