Julian Koski, Co-Founder and Chief Investment Officer, New Age Alpha Mar 9, 2021 3:44:18 PM 5 min read Stock Insights

FedEx Insight — Can FedEx Deliver ?

When it absolutely, positively has to be there…but not necessarily overnight. That seemed to be the plight FedEx faced in 2020. The shadow cast by Covid-19 impacted every business, of course, but it hit some in more unpredictable ways. Cruise lines, for example, were impacted quite negatively while Amazon’s stock did quite well in lockdown. FedEx experienced both headwinds and tailwinds, however, as the result of a populace largely working from home. In the 4th quarter of their 2020 fiscal year (FY), for example, they underperformed as demand ground to halt. However, in the 1st and 2nd quarters of FY2021, the stock rebounded strongly. Is this a fundamental problem, or a stock price problem caused by humans impounding vague and ambiguous information into FedEx’s stock price? The Human Factor may have the answer.

The Human Factor measures the probability a company will fail to deliver the growth implied by the stock price. In FedEx’s case, this may be caused by investors interpreting vague and ambiguous information in a systematically incorrect way.

Human Behavior’s Impact on FedEx

  • The initial shock of the pandemic caused FedEx to miss on earnings. In the ensuing two quarters, earnings recovered as demand rose.
  • Through the end of 2020, the virus surged anew, and people remained in quarantine through the fall and early winter. Additionally, the holiday season arrived as fewer people travelled. Many believed this would lead to potentially more delivery of packages. This sounds plausible, but is this what happened? Is this outcome based on known information that investors are using to make decisions, or is it simply a case of investors taking this vague and ambiguous information and impounding into FedEx’s stock price?
  • Investors’ uncertainties regarding pandemic concerns and holiday deliveries are exactly that: uncertainties. They should be ignored when making a decision about whether to invest in FedEx.
  • At New Age Alpha, we focus only on the information that is known (neither the vague nor the ambiguous). Based upon FedEx’s stock price and the known financial information (financial statements) we believe there is a 49.5% chance that FedEx will fail to deliver the growth implied by its stock price. The higher the Human Factor, the more likely investors are pricing vague and ambiguous information into the stock price.
  • With a Human Factor of approximately 49.5%, FedEx is fairly priced with almost even odds. Remember, the lower the Human Factor the more likely vague and ambiguous information has NOT been priced into the stock.

FedEx’s Position in its Industry

  • As of March 4, 2021, FedEx had a slightly lower Human Factor score relative to its peers in the Industrials sector. While FedEx had a score of 49.5%, the sector had a median Human Factor of 52.0%. FedEx’s Human Factor is roughly in line with its peers and, potentially, may have a higher probability of delivering the growth implied by the stock price.
  • Within the Capital Goods Industrial Group as defined by New Age Alpha’s Human Factor methodology, its score was also slightly better. With a median Human Factor of 64.5%, FedEx’s Human Factor Score was better than the majority of these peers.
To explore the Human Factor for the S&P 500® and over 5300 global stocks, ETFs and indexes, please visit New Age Alpha’s H-Factor System.

Disclosures

Past performance is not indicative of future results. Current and future results may be lower or higher than those shown. An investor utilizing the Human Factor may experience a loss. No client or prospective client should assume that any information presented in this article serves as the receipt of, or a substitute for, personalized individual advice from New Age Alpha or any other investment professional. All research and data are simulated and should not be considered indicative of the skill of New Age Alpha.

The accuracy of the Human Factor is materially reliant on the integrity of the information utilized in the calculations, including any assumptions and or interpretations made by the user about the data. Data discrepancies, and user assumptions, can all contribute to differing outcomes. The underlying assumptions and processes presented herein are subject to change. New Age Alpha reserves the right, in its sole discretion, without any obligation and without any notice, to modify the information contained in this material, or to correct any errors or omissions in any portion of this material at any time.

The above statements are not an endorsement of any company or a recommendation to buy, sell or hold any particular security. Investors are urged to consult with their financial advisors before buying or selling any securities. The views stated herein are only current through the date stated and are subject to change at any time based on market or other conditions and New Age Alpha disclaims any responsibility to update such views. Any Human Factor information or charts presented herein or utilized in the Human Factor system are provided for illustrative purposes only. The Human Factor information provided herein is a snapshot taken at a particular point in time and any analysis or information contained in this document is outdated and should not be relied upon as investment advice. Moreover, the information presented in this document may have changed materially from the date on which it was created. New Age Alpha may or may not currently own the securities at the times set forth in this article. There is no intention for New Age Alpha to include these securities in its portfolios unless it becomes part of the established universe of eligible securities that are part of each specific investment strategy (e.g. the S&P 500®). It is important to note that there can be no guarantee that the application of the Human Factor to investment portfolios or certain stocks or securities can produce profitable results.

All New Age Alpha trademarks are owned by New Age Alpha LLC. All other company or product names mentioned herein, including S&P® and Dow Jones® are the property of their respective owners and should not be deemed to be an endorsement of any New Age Alpha product, portfolio or strategy. S&P Dow Jones S&P® is a registered trademark of Standard & Poor's Financial Services LLC ("SPFS”) and Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC ("Dow Jones").

 

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