Hedge Funds Are Nibbling On JetBlue Airways Corporation (JBLU)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of JetBlue Airways Corporation (NASDAQ:JBLU).

JetBlue Airways Corporation (NASDAQ:JBLU) has seen an increase in support from the world’s most elite money managers recently. JBLU was in 36 hedge funds’ portfolios at the end of the first quarter of 2020. There were 35 hedge funds in our database with JBLU holdings at the end of the previous quarter. Our calculations also showed that JBLU isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 S&P 500 ETFs by 51 percentage points since March 2017 (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

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s analyze the key hedge fund action encompassing JetBlue Airways Corporation (NASDAQ:JBLU).

What does smart money think about JetBlue Airways Corporation (NASDAQ:JBLU)?

Heading into the second quarter of 2020, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 3% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in JBLU over the last 18 quarters. With hedge funds’ capital changing hands, there exists a few key hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).

More specifically, PAR Capital Management was the largest shareholder of JetBlue Airways Corporation (NASDAQ:JBLU), with a stake worth $58 million reported as of the end of September. Trailing PAR Capital Management was AQR Capital Management, which amassed a stake valued at $36.5 million. Arrowstreet Capital, 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 PAR Capital Management allocated the biggest weight to JetBlue Airways Corporation (NASDAQ:JBLU), around 2.46% of its 13F portfolio. Axel Capital Management is also relatively very bullish on the stock, dishing out 1.87 percent of its 13F equity portfolio to JBLU.

With a general bullishness amongst the heavyweights, key hedge funds were breaking ground themselves. SRS Investment Management, managed by Karthik Sarma, created the most outsized position in JetBlue Airways Corporation (NASDAQ:JBLU). SRS Investment Management had $8 million invested in the company at the end of the quarter. Quincy Lee’s Ancient Art (Teton Capital) also initiated a $6.5 million position during the quarter. The other funds with brand new JBLU positions are Anna Nikolayevsky’s Axel Capital Management, Chuck Royce’s Royce & Associates, and Sara Nainzadeh’s Centenus Global Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as JetBlue Airways Corporation (NASDAQ:JBLU) but similarly valued. We will take a look at Lazard Ltd (NYSE:LAZ), Valvoline Inc. (NYSE:VVV), Compania Cervecerias Unidas S.A. (NYSE:CCU), and Hutchison China MediTech Limited (NASDAQ:HCM). This group of stocks’ market caps are similar to JBLU’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $190 million in JBLU’s case. Valvoline Inc. (NYSE:VVV) is the most popular stock in this table. On the other hand Hutchison China MediTech Limited (NASDAQ:HCM) is the least popular one with only 6 bullish hedge fund positions. JetBlue Airways Corporation (NASDAQ:JBLU) is not the most popular stock in this group but hedge fund interest is still above average. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but beat the market by 13.2 percentage points. Unfortunately JBLU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JBLU were disappointed as the stock returned 12.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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