Should I Avoid XPO Logistics Inc (XPO)?

·5 min read

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 867 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30th holdings, data that is available nowhere else. Should you consider XPO Logistics Inc (NYSE:XPO) for your portfolio? We'll look to this invaluable collective wisdom for the answer.

Is XPO Logistics Inc (NYSE:XPO) a buy, sell, or hold? Hedge funds were getting less bullish. The number of bullish hedge fund positions were cut by 8 lately. XPO Logistics Inc (NYSE:XPO) was in 49 hedge funds' portfolios at the end of the third quarter of 2021. The all time high for this statistic is 57. Our calculations also showed that XPO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings).

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla 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. Keeping this in mind let's analyze the latest hedge fund action encompassing XPO Logistics Inc (NYSE:XPO).

William Gray Orbis Investment Management
William Gray Orbis Investment Management

William Gray of Orbis Investment Management

Do Hedge Funds Think XPO Is A Good Stock To Buy Now?

At the end of the third quarter, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from the previous quarter. By comparison, 39 hedge funds held shares or bullish call options in XPO a year ago. 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, William B. Gray's Orbis Investment Management has the number one position in XPO Logistics Inc (NYSE:XPO), worth close to $872.7 million, amounting to 6% of its total 13F portfolio. Sitting at the No. 2 spot is MFN Partners, managed by Farhad Nanji and Michael DeMichele, which holds a $284.5 million position; the fund has 13% of its 13F portfolio invested in the stock. Other members of the smart money that are bullish encompass Michael A. Price and Amos Meron's Empyrean Capital Partners, Ken Griffin's Citadel Investment Group and Dmitry Balyasny's Balyasny Asset Management. In terms of the portfolio weights assigned to each position MFN Partners allocated the biggest weight to XPO Logistics Inc (NYSE:XPO), around 13.04% of its 13F portfolio. Lansing Management is also relatively very bullish on the stock, earmarking 8.3 percent of its 13F equity portfolio to XPO.

Since XPO Logistics Inc (NYSE:XPO) has experienced falling interest from the smart money, we can see that there were a few money managers that elected to cut their full holdings heading into Q4. Interestingly, Andrew Wellington and Jeff Keswin's Lyrical Asset Management said goodbye to the largest investment of the "upper crust" of funds watched by Insider Monkey, totaling about $392.4 million in stock, and Zachary Sternberg and Benjamin Stein's Spruce House Investment Management was right behind this move, as the fund cut about $69.9 million worth. These moves are important to note, as total hedge fund interest dropped by 8 funds heading into Q4.

Let's now take a look at hedge fund activity in other stocks similar to XPO Logistics Inc (NYSE:XPO). These stocks are Tempur Sealy International Inc. (NYSE:TPX), Concentrix Corporation (NASDAQ:CNXC), AECOM (NYSE:ACM), Biohaven Pharmaceutical Holding Company Ltd. (NYSE:BHVN), Algonquin Power & Utilities Corp. (NYSE:AQN), Neurocrine Biosciences, Inc. (NASDAQ:NBIX), and Sunrun Inc (NASDAQ:RUN). 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 TPX,37,1299293,2 CNXC,21,586853,0 ACM,39,783809,7 BHVN,33,1063983,6 AQN,15,152646,-9 NBIX,31,980578,-1 RUN,37,1677910,-8 Average,30.4,935010,-0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $935 million. That figure was $1834 million in XPO's case. AECOM (NYSE:ACM) is the most popular stock in this table. On the other hand Algonquin Power & Utilities Corp. (NYSE:AQN) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks XPO Logistics Inc (NYSE:XPO) is more popular among hedge funds. Our overall hedge fund sentiment score for XPO is 72.8. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. Unfortunately XPO wasn't nearly as popular as these 5 stocks and hedge funds that were betting on XPO were disappointed as the stock returned -9% since the end of the third quarter (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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