Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 37.4% in 2019 (through the end of November) and outperformed the S&P 500 ETF by 9.9 percentage points. We are done processing the latest 13F filings and in this article we will study how hedge fund sentiment towards Allegiant Travel Company (NASDAQ:ALGT) changed during the first quarter.
Allegiant Travel Company (NASDAQ:ALGT) was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. ALGT has experienced a decrease in activity from the world’s largest hedge funds lately. There were 18 hedge funds in our database with ALGT positions at the end of the previous quarter. Our calculations also showed that ALGT isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.
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. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to take a gander at the new hedge fund action surrounding Allegiant Travel Company (NASDAQ:ALGT).
Hedge fund activity in Allegiant Travel Company (NASDAQ:ALGT)
At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ALGT over the last 17 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, PAR Capital Management, managed by Paul Reeder, holds the largest position in Allegiant Travel Company (NASDAQ:ALGT). PAR Capital Management has a $243.2 million position in the stock, comprising 4.2% of its 13F portfolio. The second most bullish fund manager is Diamond Hill Capital, led by Ric Dillon, holding a $79.1 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions encompass Ken Griffin’s Citadel Investment Group, Robert Rodriguez and Steven Romick’s First Pacific Advisors and Matthew Hulsizer’s PEAK6 Capital Management. In terms of the portfolio weights assigned to each position Mountain Lake Investment Management allocated the biggest weight to Allegiant Travel Company (NASDAQ:ALGT), around 11.35% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, earmarking 4.21 percent of its 13F equity portfolio to ALGT.
Because Allegiant Travel Company (NASDAQ:ALGT) has experienced declining sentiment from hedge fund managers, it’s safe to say that there was a specific group of fund managers that decided to sell off their positions entirely by the end of the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dropped the largest investment of the “upper crust” of funds followed by Insider Monkey, worth about $3 million in stock, and Paul Tudor Jones’s Tudor Investment Corp was right behind this move, as the fund said goodbye to about $2.3 million worth. These moves are interesting, as total hedge fund interest was cut by 2 funds by the end of the third quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Allegiant Travel Company (NASDAQ:ALGT) but similarly valued. We will take a look at Werner Enterprises, Inc. (NASDAQ:WERN), The Chemours Company (NYSE:CC), Saia Inc (NASDAQ:SAIA), and Lattice Semiconductor Corporation (NASDAQ:LSCC). This group of stocks’ market caps resemble ALGT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WERN | 18 | 112767 | 3 |
| CC | 29 | 273189 | 1 |
| SAIA | 13 | 66696 | 4 |
| LSCC | 24 | 232643 | 4 |
| Average | 21 | 171324 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 21 hedge funds with bullish positions and the average amount invested in these stocks was $171 million. That figure was $530 million in ALGT’s case. The Chemours Company (NYSE:CC) is the most popular stock in this table. On the other hand Saia Inc (NASDAQ:SAIA) is the least popular one with only 13 bullish hedge fund positions. Allegiant Travel Company (NASDAQ:ALGT) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. A small number of hedge funds were also right about betting on ALGT as the stock returned 13.9% during the first two months of Q4 and outperformed the market by an even larger margin.
Disclosure: None. This article was originally published at Insider Monkey.
