At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards FedEx Corporation (NYSE:FDX).
FedEx Corporation (NYSE:FDX) shareholders have witnessed a decrease in hedge fund interest lately. FedEx Corporation (NYSE:FDX) was in 46 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 53. There were 50 hedge funds in our database with FDX holdings at the end of March. Our calculations also showed that FDX isn't among the 30 most popular stocks among hedge funds (click for Q2 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.
Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. 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 58 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.
Frank Brosens of Taconic Capital
With all of this in mind we're going to analyze the fresh hedge fund action regarding FedEx Corporation (NYSE:FDX).
What does smart money think about FedEx Corporation (NYSE:FDX)?
At the end of June, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -8% from the first quarter of 2020. By comparison, 40 hedge funds held shares or bullish call options in FDX a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in FedEx Corporation (NYSE:FDX) was held by Bill & Melinda Gates Foundation Trust, which reported holding $424.2 million worth of stock at the end of September. It was followed by Southeastern Asset Management with a $295.8 million position. Other investors bullish on the company included Citadel Investment Group, Greenhaven Associates, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to FedEx Corporation (NYSE:FDX), around 7.38% of its 13F portfolio. Elm Ridge Capital is also relatively very bullish on the stock, designating 5.79 percent of its 13F equity portfolio to FDX.
Since FedEx Corporation (NYSE:FDX) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there was a specific group of hedge funds that decided to sell off their positions entirely last quarter. At the top of the heap, Jacob Mitchell's Antipodes Partners cut the largest position of all the hedgies followed by Insider Monkey, valued at an estimated $23.8 million in stock. Anand Parekh's fund, Alyeska Investment Group, also dropped its stock, about $23.4 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let's now review hedge fund activity in other stocks similar to FedEx Corporation (NYSE:FDX). These stocks are L3Harris Technologies, Inc. (NYSE:LHX), Monster Beverage Corp (NASDAQ:MNST), General Motors Company (NYSE:GM), Exelon Corporation (NASDAQ:EXC), Veeva Systems Inc (NYSE:VEEV), Eaton Corporation plc (NYSE:ETN), and Las Vegas Sands Corp. (NYSE:LVS). This group of stocks' market values match FDX's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LHX,50,1312574,7 MNST,35,1880728,-8 GM,69,4380069,16 EXC,30,772535,-3 VEEV,35,529727,2 ETN,34,560308,-1 LVS,47,2396746,5 Average,42.9,1690384,2.6 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 42.9 hedge funds with bullish positions and the average amount invested in these stocks was $1690 million. That figure was $1255 million in FDX's case. General Motors Company (NYSE:GM) is the most popular stock in this table. On the other hand Exelon Corporation (NASDAQ:EXC) is the least popular one with only 30 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 47.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on FDX as the stock returned 102.8% since the end of Q2 (through 10/23) 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.