Several hedge fund managers initiated new positions in FedEx Corporation (FDX, Financial), the leader in global express delivery services, in the third quarter and lost ground thanks to a price decline.
FedEx provides guaranteed domestic and international air express, residential and business ground package delivery, heavy freight and logistics services.
Hedge fund's new positions
The gurus who initiated those positions were Tom Gayner (Trades, Portfolio), Ray Dalio (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Mario Gabelli (Trades, Portfolio) and Jim Simons (Trades, Portfolio). In the next table, we can analyze the results they will have obtained if they continued with their long positions until the end of 2015. This is something we are going to know in the next 13 filing (SEC Form 13-F filing), within 45 days of the end of the quarter. By doing this exercise we can reach some conclusions about the stock's performance.
| Guru | # Shares | Mean Price Q3 | Today´s Price | Difference | Loss |
| Tom Gayner (Trades, Portfolio) | 15,000 | 156.315 | 148.91 | -7.405 | (111,075.00) |
| Ray Dalio (Trades, Portfolio) | 123,082 | 156.315 | 148.91 | -7.405 | (911,422.21) |
| Joel Greenblatt (Trades, Portfolio) | 108,734 | 156.315 | 148.91 | -7.405 | (805,175.27) |
| Mario Gabelli (Trades, Portfolio) | 14,330 | 156.315 | 148.91 | -7.405 | (106,113.65) |
| Jim Simons (Trades, Portfolio) | 936,400 | 156.315 | 148.91 | -7.405 | (6,934,042.00) |
Source: Authors Calculations
Thanks to GuruFocus we can obtain the price range in the quarter and calculate the mean. Considering the closing price at the end of the year, we obtain the price difference and multiply by the number of shares bought. Due to a price decline in the period, all the managers had losses. That decline was accentuated after reporting quarterly results.
Fiscal second-quarter performance
The company has improved its revenue 4.3% and expanded its operating margin 100 basis points to 9.6%. Earnings per share increased by 5.6% in the quarter compared to the same quarter a year earlier. The net income growth has been better than that of the Standard & Poor's 500 but is less than the industry mean. The net income increased by 4.2% when compared to the previous year, to $691.0 million from $663.0 million. During the past fiscal year, it reported lower earnings of $3.60 versus $6.79 in the previous year. Mr. Market is positive about this year's earnings, tripling the figure to $10.56. Moreover, the company has reiterated fiscal 2016 EPS guidance in the range of $10.40 to $10.90.
Relative valuation
In terms of valuation, the company sells at a trailing P/E of 34.45x, trading at a premium compared to the industry mean.
| Key Ratios | FDX | Industry Avg | S&P 500 |
| Price/Earnings | 36.6 | 24.3 | 19 |
| Price/Book | 2.6 | 5.6 | 2.7 |
| Price/Sales | 0.8 | 1.1 | 1.8 |
| Dividend Yield (%) | 0.7 | 2.1 | 2.3 |
Compared to its competitor, United Parcel Service (UPS, Financial), the company looks relatively expensive on the basis of its PE ratio. Furthermore, its dividend yield is particularly low.
The price performance and EPS showed an interesting upward trend in the last five years. A long position of $10,000 five years ago today represents $16,628, which represents a 10.7% compound annual growth rate.
Final comment
FedEx is a long survivor of several economic cycles and oil supply crises. Nothing will change in the future scenario, and the firm will survive from fuel price shocks or global economic cycles. Obviously, cost reductions and efficiency in fuel consumption are areas for increasing productivity in the future.
Although it is an expensive stock today, its business has grown in the past, and it should benefit from global conditions like ecommerce. On the other hand, gurus like Lee Ainslie and Daniel Loeb sold out the stock in the trimester.
Disclosure: Omar Venerio holds no position in any stocks mentioned.
