As shares of FedEx have moved to better reflect pandemic tailwinds and initial integration benefits, we’re pulling the long off our Best Ideas list.
Since our February addition of FDX, it has generated a total return of nearly 100% vs. a rough 10% decline (negative total return) for the XLI. Most of that return came in recent months, despite the clear initial pandemic-related pricing tailwinds in Express and, later, Ground.
We see frustratingly delayed responses in several other longs that have yet to generate the needed momentum (or retail interest) for outperformance in 2020.
We continue to model a beat by FDX in tomorrow’s earnings report but have learned to avoid relying on the ‘Street’ communication skill of FedEx management. Recent upgrades reflect the ‘obvious’ nature of tomorrow’s likely beat. We don’t expect a ‘sell the news’ event but we would rather be flexible should that prove useful.
The large ‘alpha’ that was worth betting on a leveraged transport seems baked in at this level.