For now, we are removing FDX from the Hedgeye Best Ideas list. However, we continue to very much ‘like’ FDX from a long-term perspective. The shares meet our investment process (cycle, industry structure, valuation), but the opportunity is better appreciated at current levels relative to when we first highlighted shares of FDX. If the Express segment margin expands as we expect, the shares may offer further appreciation.
UPS’s recent report highlighted improved volume growth for the industry, part of the expectation we put forward in our November 2012 Express & Couriers Services black book. We continue to see the potential for further share price appreciation in coming years as the value of FedEx Express is better reflected in the market’s valuation of FDX. While at current relative levels we are removing FDX from the list, we will certainly look for opportunities to add the shares back to it in line with our long-term thesis.
The shares were the 11th best performer in the S&P 500 Industrials last year and the top performing Transport in the sector from the start of the year. The shares have outperformed the S&P 500 by about 22% since our November 2012