Hedge Funds Are Betting On Virgin America Inc (VA)

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Virgin America Inc (NASDAQ:VA) from the perspective of those elite funds.

Is Virgin America Inc (NASDAQ:VA) going to take off soon? Investors who are in the know are taking an optimistic view. The number of long hedge fund positions increased by 9 recently. VA was in 21 hedge funds’ portfolios at the end of the third quarter of 2015. There were 12 hedge funds in our database with VA positions at the end of the previous quarter. At the end of this article we will also compare VA to other stocks, including 2U Inc (NASDAQ:TWOU), Mine Safety Appliances (NYSE:MSA), and Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD) to get a better sense of its popularity.

In the eyes of most traders, hedge funds are perceived as worthless, outdated financial vehicles of the past. While there are more than 8000 funds in operation today, Our researchers look at the masters of this club, around 700 funds. These investment experts watch over bulk of all hedge funds’ total capital, and by keeping track of their first-class equity investments, Insider Monkey has unsheathed various investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outstripped the S&P 500 index by 12 percentage points a year for a decade in their back tests.

Keeping this in mind, we’re going to go over the recent action surrounding Virgin America Inc (NASDAQ:VA).

What does the smart money think about Virgin America Inc (NASDAQ:VA)?

Heading into Q4, a total of 21 of the hedge funds tracked by Insider Monkey were bullish on this stock, a surge of 75% from the previous quarter. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Stephen C. Freidheim’s Cyrus Capital Partners has the biggest position in Virgin America Inc (NASDAQ:VA), worth close to $359.7 million, amounting to 38.4% of its total 13F portfolio. The second most bullish fund manager is Paul Reeder and Edward Shapiro of PAR Capital Management, with a $77.5 million position; 1.6% of its 13F portfolio is allocated to the stock. Other members of the smart money that are bullish include Sanford J. Colen’s Apex Capital, and John Overdeck and David Siegel’s Two Sigma Advisors.

Consequently, specific money managers were leading the bulls’ herd. Two Sigma Advisors, managed by John Overdeck and David Siegel, initiated the biggest position in Virgin America Inc (NASDAQ:VA). The fund had $14.4 million invested in the company at the end of the quarter. Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital also initiated an $11.1 million position during the quarter. The other funds with new positions in the stock are Clint Carlson’s Carlson Capital, Steve Cohen’s Point72 Asset Management, and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks similar to Virgin America Inc (NASDAQ:VA). We will take a look at 2U Inc (NASDAQ:TWOU), Mine Safety Appliances (NYSE:MSA), Ironwood Pharmaceuticals, Inc. (NASDAQ:IRWD), and The E.W. Scripps Company (NYSE:SSP). This group of stocks’ market valuations are similar to VA’s market valuation.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $140 million. In the case of VA, that figure was $586 million. 2U Inc (NASDAQ:TWOU) and Mine Safety Appliances (NYSE:MSA) lead the pack, while The E.W. Scripps Company (NYSE:SSP) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Virgin America Inc (NASDAQ:VA) is more popular among hedge funds and has attracted more the hedgies’ money. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.