Is GXO Logistics (GXO) a smart long term buy?



Alger, an investment management company, has published its letter to investors “Alger Mid Cap Focus Fund” for the third quarter of 2021 – a copy of which can be found. downloaded here. During the third quarter, the portfolio’s largest sector weightings were information technology and healthcare. The largest sector overweighting was industry. The portfolio had no exposure to the utilities or energy sectors and negligible exposure to the real estate and materials sectors. You can check out the top 5 holdings in the fund to get a feel for their top picks for 2021.

Algiers, in its letter to investors for the third quarter of 2021, mentioned GXO Logistics, Inc. (NYSE: GXO) and discussed his position on the company. GXO Logistics, Inc. is a contract logistics company based in Greenwich, Connecticut with a market capitalization of $ 9.8 billion. GXO has generated a return of 36.81% year-to-date, while its 12-month returns are up 100.13%. The stock closed at $ 85.72 per share on October 22, 2021.

Here’s what Algiers has to say about GXO Logistics, Inc. in its Q3 2021 letter to investors:

GXO logistics is the second largest contract logistics provider in the world. It operates a lightweight asset model that provides value-added warehousing and distribution, order fulfillment, e-commerce and reverse logistics (or providing services to consumers who return purchased items to retailers) and other supply chain services. It has one of the largest outsourced e-commerce logistics platforms in the world, including the largest e-fulfillment platform in Europe. The company is characterized by multi-year and recurring contractual relationships in which GXO provides personalized technology-based services to customers on a large scale. The company was split from XPO Logistics in July 2021, allowing the unlocking of equity value. The strong stock performance reflects a revaluation of the higher valuation multiple, with investors appreciating the rarity value of the stock (or the value of not having other contract logistics companies listed on the stock exchange). The company’s exposure to secular growth trends in its end markets, high percentage of recurring revenue, solid revenue growth and potential for margin expansion also supported the performance of its stocks. “



Based on our calculations, GXO Logistics, Inc. (NYSE: GXO) failed to secure a spot in our list of 30 most popular stocks among hedge funds. GXO Logistics, Inc. (NYSE: GXO) generated a return of -4.16% over the past 3 months.

The reputation of hedge funds as savvy investors has been tarnished over the past decade, as their hedged returns could not keep up with the unhedged returns of stock indices. Our research has shown that small cap hedge fund stock selection managed to beat the market by double digits every year between 1999 and 2016, but the margin for outperformance has shrunk in recent years. Nonetheless, we were still able to identify in advance a select group of hedge funds that have outperformed S&P 500 ETFs by 115 percentage points since March 2017 (see details here). We were also able to identify in advance a select group of hedge funds that underperformed the market by 10 percentage points per year between 2006 and 2017. Interestingly, the margin of underperformance of these stocks has increased in recent years. Investors who are long in the market and short on these stocks would have reported more than 27% per year between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

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Disclosure: none. This article was originally published on Monkey initiate.



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