How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding United Airlines Holdings Inc (NYSE:UAL) and determine whether hedge funds had an edge regarding this stock.
United Airlines Holdings Inc (NYSE:UAL) was in 30 hedge funds’ portfolios at the end of September. The all time high for this statistic is 73. UAL investors should pay attention to a decrease in support from the world’s most elite money managers recently. There were 39 hedge funds in our database with UAL holdings at the end of June. Our calculations also showed that UAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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 let’s review the latest hedge fund action regarding United Airlines Holdings Inc (NYSE:UAL).
Do Hedge Funds Think UAL Is A Good Stock To Buy Now?
At Q3’s end, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -23% from the previous quarter. On the other hand, there were a total of 40 hedge funds with a bullish position in UAL a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Citadel Investment Group held the most valuable stake in United Airlines Holdings Inc (NYSE:UAL), which was worth $374.8 million at the end of the third quarter. On the second spot was PAR Capital Management which amassed $176 million worth of shares. Masters Capital Management, D E Shaw, and GLG Partners 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 Jade Capital Advisors allocated the biggest weight to United Airlines Holdings Inc (NYSE:UAL), around 6.26% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, designating 4.62 percent of its 13F equity portfolio to UAL.
Seeing as United Airlines Holdings Inc (NYSE:UAL) has witnessed declining sentiment from hedge fund managers, we can see that there were a few hedgies who sold off their entire stakes heading into Q4. It’s worth mentioning that Brad Gerstner’s Altimeter Capital Management cut the biggest position of all the hedgies followed by Insider Monkey, valued at about $150.1 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dropped about $52.1 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 9 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to United Airlines Holdings Inc (NYSE:UAL). We will take a look at Sociedad Quimica y Minera (NYSE:SQM), Paylocity Holding Corp (NASDAQ:PCTY), Nomura Holdings, Inc. (NYSE:NMR), The AES Corporation (NYSE:AES), Incyte Corporation (NASDAQ:INCY), Arch Capital Group Ltd. (NASDAQ:ACGL), and Smith & Nephew plc (NYSE:SNN). This group of stocks’ market valuations are closest to UAL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQM | 26 | 211676 | 7 |
| PCTY | 27 | 740385 | 8 |
| NMR | 6 | 19317 | -1 |
| AES | 47 | 1481369 | 8 |
| INCY | 37 | 3295444 | 3 |
| ACGL | 31 | 1214570 | 9 |
| SNN | 19 | 106245 | 6 |
| Average | 27.6 | 1009858 | 5.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $1010 million. That figure was $403 million in UAL’s case. The AES Corporation (NYSE:AES) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 bullish hedge fund positions. United Airlines Holdings Inc (NYSE:UAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UAL is 37.6. 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 positive signal but 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 beat the market again by 3.6 percentage points. Unfortunately, UAL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UAL were disappointed as the stock returned -9.9% 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.
