Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of June. At Insider Monkey, we follow nearly 835 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is American Airlines Group Inc (NASDAQ:AAL), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
American Airlines Group Inc (NASDAQ:AAL) investors should be aware of a decrease in hedge fund interest of late. Our calculations also showed that AAL isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Paul Reeder of PAR Capital Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. With all of this in mind let’s view the new hedge fund action regarding American Airlines Group Inc (NASDAQ:AAL).
Hedge fund activity in American Airlines Group Inc (NASDAQ:AAL)
At Q4’s end, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AAL over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
Among these funds, Berkshire Hathaway held the most valuable stake in American Airlines Group Inc (NASDAQ:AAL), which was worth $1218.9 million at the end of the third quarter. On the second spot was Lansdowne Partners which amassed $186.6 million worth of shares. Citadel Investment Group, Cyrus Capital Partners, and PAR Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cyrus Capital Partners allocated the biggest weight to American Airlines Group Inc (NASDAQ:AAL), around 12.77% of its 13F portfolio. Lansdowne Partners is also relatively very bullish on the stock, earmarking 5.05 percent of its 13F equity portfolio to AAL.
Judging by the fact that American Airlines Group Inc (NASDAQ:AAL) has witnessed declining sentiment from the smart money, it’s easy to see that there exists a select few funds who were dropping their full holdings by the end of the third quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $16.7 million in stock, and Gregg Moskowitz’s Interval Partners was right behind this move, as the fund cut about $15.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 2 funds by the end of the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as American Airlines Group Inc (NASDAQ:AAL) but similarly valued. We will take a look at United Rentals, Inc. (NYSE:URI), InterContinental Hotels Group PLC (NYSE:IHG), Fidelity National Financial Inc (NYSE:FNF), and Cenovus Energy Inc (NYSE:CVE). This group of stocks’ market values are closest to AAL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| URI | 54 | 1223368 | -5 |
| IHG | 6 | 27333 | -1 |
| FNF | 36 | 357320 | 6 |
| CVE | 31 | 578518 | 3 |
| Average | 31.75 | 546635 | 0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.75 hedge funds with bullish positions and the average amount invested in these stocks was $547 million. That figure was $2005 million in AAL’s case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand InterContinental Hotels Group PLC (NYSE:IHG) is the least popular one with only 6 bullish hedge fund positions. American Airlines Group Inc (NASDAQ:AAL) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but beat the market by 1.9 percentage points. Unfortunately AAL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AAL were disappointed as the stock returned -48.4% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
