Is FedEx (FDX) an excellent investment choice?
East 72, an investment management firm, has released its Q3 2021 letter to investors – a copy of which can be downloaded here. A gross return on the quarterly portfolio of 2.1% was recorded by the fund for the third quarter of 2021 and a gross return of + 36.7% for the year. You can check out the top 5 holdings in the fund to get a feel for their top picks for 2021.
East 72, in its Q3 2021 letter to investors, mentioned FedEx Corporation (NYSE: FDX) and discussed its position on the company. FedEx Corporation is a Memphis, Tennessee-based transportation company with a market capitalization of $ 59.4 billion. FDX has returned -13.82% year-to-date, while its 12-month returns are down -20.69%. The stock closed at $ 223.73 per share on October 13, 2021.
Here’s what East 72 has to say about FedEx Corporation in its Q3 2021 letter to investors:
“The variables that help estimate earnings growth have been so volatile for some time; not just the strictly financial aspects, but the impact on the timing of pandemic delays, the resulting labor shortages, port and shipping delays (and costs) and inefficiencies in the supply chain. The Christmas stock that arrives in January isn’t very useful – and for some unlucky ones, it will.
As an example, FedEx Q1FY22 results showed a $ 450 million increase in “costs due to a tight labor market that impacted labor availability.” , resulting in inefficiencies in the network, higher wage rates and increased purchased transport expenses. This was partially offset by higher parcel and freight yields, an increase in international express export shipments and a favorable net impact on fuel â€3. If all costs were labor related, this would represent an increase of about 6% in “inefficiencyâ€. No inflation, remember … “
Based on our calculations, FedEx Corporation (NYSE: FDX) was unable to land a spot on our list of the 30 most popular stocks among hedge funds. FDX was in 61 hedge fund portfolios at the end of the first half of 2021, compared to 63 funds in the previous quarter. FedEx Corporation (NYSE: FDX) has generated a return of -24.44% in the past 3 months.
The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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Disclosure: none. This article originally appeared on Insider Monkey.