Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in LATAM Airlines Group SA (ADR) (NYSE:LFL) ? The smart money sentiment can provide an answer to this question.
LATAM Airlines Group SA (ADR) (NYSE:LFL) shareholders have witnessed an increase in support from the world’s most successful money managers in recent months. There were 5 hedge funds in our database with LFL positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Endurance Specialty Holdings Ltd. (NYSE:ENH), Eaton Vance Corp (NYSE:EV), and CONSOL Energy Inc. (NYSE:CNX) to gather more data points.
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Follow Latam Airlines Group S.a. (NYSE:LTM)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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With all of this in mind, we’re going to go over the latest action regarding LATAM Airlines Group SA (ADR) (NYSE:LFL).
What have hedge funds been doing with LATAM Airlines Group SA (ADR) (NYSE:LFL)?
At Q3’s end, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of 60% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LFL over the last 5 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in LATAM Airlines Group SA (ADR) (NYSE:LFL), worth close to $17 million, amounting to less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Jim Simons of Renaissance Technologies, with a $14.5 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism comprise Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw and Robert Bishop’s Impala Asset Management. We should note that Impala Asset Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Consequently, some big names were leading the bulls’ herd. Millennium Management, one of the 10 largest hedge funds in the world, created the largest position in LATAM Airlines Group SA (ADR) (NYSE:LFL). Millennium Management had $6.5 million invested in the company at the end of the quarter. D. E. Shaw’s D E Shaw also initiated a $1.7 million position during the quarter. The only other fund with a brand new LFL position is Mike Vranos’s Ellington.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as LATAM Airlines Group SA (ADR) (NYSE:LFL) but similarly valued. These stocks are Endurance Specialty Holdings Ltd. (NYSE:ENH), Eaton Vance Corp (NYSE:EV), CONSOL Energy Inc. (NYSE:CNX), and CSRA Inc (MYSE:CSRA). This group of stocks’ market valuations match LFL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ENH | 18 | 306751 | 0 |
| EV | 9 | 15421 | -1 |
| CNX | 38 | 1774058 | 4 |
| CSRA | 25 | 524486 | -2 |
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $655 million. That figure was $41 million in LFL’s case. CONSOL Energy Inc. (NYSE:CNX) is the most popular stock in this table. On the other hand Eaton Vance Corp (NYSE:EV) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks LATAM Airlines Group SA (ADR) (NYSE:LFL) is even less popular than EV. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.
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