Here’s What Hedge Funds Think About XPO Logistics Inc (XPO)

Nina Todic

Wed, Jun 19, 2019, 6:11 PM

Is XPO Logistics Inc (NYSE:XPO) a good equity to bet on right now? We like to check what the smart money thinks first before doing extensive research. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

XPO Logistics Inc (NYSE:XPO) investors should be aware of a decrease in activity from the world's largest hedge funds in recent months. Our calculations also showed that xpo isn't among the 30 most popular stocks among hedge funds.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

We're going to take a glance at the new hedge fund action regarding XPO Logistics Inc (NYSE:XPO).

How are hedge funds trading XPO Logistics Inc (NYSE:XPO)?

At the end of the first quarter, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -41% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards XPO over the last 15 quarters. With the smart money's capital changing hands, there exists a select group of key hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

Of the funds tracked by Insider Monkey, William B. Gray's Orbis Investment Management has the biggest position in XPO Logistics Inc (NYSE:XPO), worth close to $1.1514 billion, comprising 7.8% of its total 13F portfolio. The second largest stake is held by Zachary Sternberg and Benjamin Stein of Spruce House Investment Management, with a $685.2 million position; 25.2% of its 13F portfolio is allocated to the stock. Some other peers that are bullish comprise Farhad Nanji and Michael DeMichele's MFN Partners, Israel Englander's Millennium Management and Joel Greenblatt's Gotham Asset Management.

Judging by the fact that XPO Logistics Inc (NYSE:XPO) has witnessed a decline in interest from the entirety of the hedge funds we track, logic holds that there was a specific group of money managers who sold off their entire stakes by the end of the third quarter. Interestingly, Doug Silverman and Alexander Klabin's Senator Investment Group said goodbye to the biggest position of the 700 funds tracked by Insider Monkey, valued at about $85.6 million in stock. D. E. Shaw's fund, D E Shaw, also sold off its stock, about $48.2 million worth. These transactions are important to note, as total hedge fund interest dropped by 18 funds by the end of the third quarter.

Let's go over hedge fund activity in other stocks similar to XPO Logistics Inc (NYSE:XPO). We will take a look at National Instruments Corporation (NASDAQ:NATI), Healthcare Trust Of America Inc (NYSE:HTA), Assurant, Inc. (NYSE:AIZ), and Nektar Therapeutics (NASDAQ:NKTR). All of these stocks' market caps match XPO's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NATI,28,604817,-1 HTA,19,458711,2 AIZ,39,617750,8 NKTR,17,252184,-3 Average,25.75,483366,1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $483 million. That figure was $2006 million in XPO's case. Assurant, Inc. (NYSE:AIZ) is the most popular stock in this table. On the other hand Nektar Therapeutics (NASDAQ:NKTR) is the least popular one with only 17 bullish hedge fund positions. XPO Logistics Inc (NYSE:XPO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately XPO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on XPO were disappointed as the stock returned -3.2% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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

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