Did Hedge Funds Get American Airlines Group Inc (AAL) Right?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards American Airlines Group Inc (NASDAQ:AAL) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is American Airlines Group Inc (NASDAQ:AAL) worth your attention right now? Money managers were in a bullish mood. The number of bullish hedge fund bets moved up by 5 in recent months. American Airlines Group Inc (NASDAQ:AAL) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 77. Our calculations also showed that AAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 25 hedge funds in our database with AAL positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind we’re going to take a look at the key hedge fund action surrounding American Airlines Group Inc (NASDAQ:AAL).

Louis Bacon Moore of Moore Capital

Do Hedge Funds Think AAL Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the second quarter of 2021. On the other hand, there were a total of 37 hedge funds with a bullish position in AAL a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

More specifically, Citadel Investment Group was the largest shareholder of American Airlines Group Inc (NASDAQ:AAL), with a stake worth $213.6 million reported as of the end of September. Trailing Citadel Investment Group was Two Sigma Advisors, which amassed a stake valued at $164.4 million. Alkeon Capital Management, Renaissance Technologies, and Citadel Investment Group 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 Ovata Capital Management allocated the biggest weight to American Airlines Group Inc (NASDAQ:AAL), around 3.27% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, earmarking 1.54 percent of its 13F equity portfolio to AAL.

With a general bullishness amongst the heavyweights, key money managers were breaking ground themselves. Renaissance Technologies, initiated the biggest position in American Airlines Group Inc (NASDAQ:AAL). Renaissance Technologies had $106.9 million invested in the company at the end of the quarter. Louis Bacon’s Moore Global Investments also initiated a $13.1 million position during the quarter. The other funds with new positions in the stock are James Chen’s Ovata Capital Management, Michael Cowley’s Sandbar Asset Management, and Alexander Mitchell’s Scopus Asset Management.

Let’s now review hedge fund activity in other stocks similar to American Airlines Group Inc (NASDAQ:AAL). We will take a look at Teck Resources Ltd (NYSE:TECK), Open Text Corporation (NASDAQ:OTEX), Crown Holdings, Inc. (NYSE:CCK), Athene Holding Ltd. (NYSE:ATH), Icahn Enterprises LP (NASDAQ:IEP), CBOE Global Markets Inc (NASDAQ:CBOE), and Williams-Sonoma, Inc. (NYSE:WSM). All of these stocks’ market caps match AAL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $2801 million. That figure was $651 million in AAL’s case. Crown Holdings, Inc. (NYSE:CCK) is the most popular stock in this table. On the other hand Icahn Enterprises LP (NASDAQ:IEP) is the least popular one with only 4 bullish hedge fund positions. American Airlines Group Inc (NASDAQ:AAL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for AAL is 48.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 and surpassed the market again by 3.6 percentage points. Unfortunately, AAL wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); AAL investors were disappointed as the stock returned -19.7% since the end of September (through 1/31) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as all of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.