By Andrew Sebastian
The shares of Ryder System (NYSE:R) have been relatively flat in 2015, appreciating only 1% compared to the S&P 500's 3% gain year-to-date. The stagnant stock price has not made hedge funds or analysts sour on the stock, however. A number of hedge funds either increased their positions or built new ones in Ryder as reported in their latest filings, and analysts see big upside in the shares.
Impala Asset Management is the largest holder among hedge funds in the shares of Ryder with 729,688 shares of the company, an increase of 7% over its previous position and valued at $69 million. Like Impala, AQR Capital raised its position to about 439,000 shares, representing an increase of 10% to a value of $41.6 million. Tetrem Capital also upped its stake in Ryder by 44% to 294,507 shares with a value of $35.4 million. Scopus Asset Management built a new position in Ryder with 390,000 shares of the company valued at $37 million. Vollero Beach Capital Partners joined Scopus in building a new position in Ryder with 172,606 shares and carrying a value of $16.4 million. Other notable funds ramping up their positions in the shares of Ryder were Jim Simons' Renaissance Technologies and Ken Griffin's Citadel Investment Group.
Following the investments of hedge funds like Impala, AQR, and Tetrem can be helpful to the everyday investor. We discovered that a portfolio of the 15 most popular small-cap picks of hedge funds beat the S&P 500 Total Return Index by nearly a percentage point per month on average between 1999 and 2012. Ryder is a mid-cap stock with a market cap of $5 billion, but we found that the most popular large-cap picks of hedge funds underperformed the same index by seven basis points per month during the same period. This is likely a surprise to many investors, who think of small-caps as risky, unpredictable stocks and put more faith in large-cap stocks. In forward tests since August 2012 these top small-cap stocks beat the market by an impressive 84 percentage points, returning over 144% (read the details here). Retail investors need to prevent themselves from following the herd and instead take advantage of the best growth opportunities in the market by concentrating on small-cap stocks.
Ryder occupies that middle ground between small-cap and large-cap stocks, and every investment needs to be analyzed on its own merits regardless of its capitalization range. Like the hedge funds previously discussed, analysts have an upbeat outlook on the shares of Ryder. Zacks rates Ryder a buy due to upward trends in revenue and earnings due to the company's modernization of its rental fleet, which has led to savings in fuel efficiency and capturing clients looking for environmentally friendly alternatives. RBC is bullish on Ryder as well with a price target of $125. In its last quarter, Ryder firmly beat analysts' consensus EPS estimate by $0.07 with EPS of $1.08. On top of the earnings beat, the company raised its EPS guidance for 2015 to a range of $6.40 - $6.55 from $6.25 - $6.40. If Ryder meets the low end of its estimate and trades at its current P/E multiple of 22, the stock could rise close to 50% from its current price of $94.00. Wall Street analysts in aggregate expect the company's total EPS to be $6.50 in 2015, so the stock could rise even higher if it meets those estimates - over 50% at its current P/E. Even if Ryder traded on par with the market with a P/E of 18 and met the low end of its own estimate, there would be over 20% upside in the stock - still a nice return any way you cut it.
