Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed over the past few years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that hedge funds do have great stock picking skills, so let’s take a glance at the smart money sentiment towards LATAM Airlines Group SA (ADR) (NYSE:LFL).
Is LATAM Airlines Group SA (ADR) (NYSE:LFL) going to take off soon? Hedge funds are in a pessimistic mood. The number of bullish hedge fund bets were cut by 1 lately. LFL was in 4 hedge funds’ portfolios at the end of the third quarter of 2015. There were 5 hedge funds in our database with LFL holdings 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 Dynegy Inc. (NYSE:DYN), Cal-Maine Foods Inc (NASDAQ:CALM), and International Game Technology (NYSE:IGT) to gather more data points.
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Now, we’re going to analyze the fresh action encompassing LATAM Airlines Group SA (ADR) (NYSE:LFL).
How are hedge funds trading LATAM Airlines Group SA (ADR) (NYSE:LFL)?
At the end of the third quarter, a total of 4 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from the second quarter. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the largest position in LATAM Airlines Group SA (ADR) (NYSE:LFL). AQR Capital Management has a $18.4 million position in the stock, comprising less than 0.1% of its 13F portfolio. On AQR Capital Management’s heels is Millennium Management, led by Israel Englander, holding a $0.1 million position; less than 0.1% of its 13F portfolio is allocated to the stock. Remaining peers that hold long positions include Jane Mendillo’s Harvard Management Co, and Matthew Hulsizer’s PEAK6 Capital Management.
Seeing as LATAM Airlines Group SA (ADR) (NYSE:LFL) has experienced declining sentiment from hedge fund managers, it’s easy to see that there lies a certain “tier” of money managers who were dropping their full holdings last quarter. At the top of the heap, Peter Muller’s PDT Partners dropped the largest position of all the hedgies monitored by Insider Monkey, valued at about $0.6 million in stock, and Matthew Tewksbury’s Stevens Capital Management was right behind this move, as the fund dropped about $0.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 1 funds last quarter.
Let’s go over hedge fund activity in other stocks similar to LATAM Airlines Group SA (ADR) (NYSE:LFL). These stocks are Dynegy Inc. (NYSE:DYN), Cal-Maine Foods Inc (NASDAQ:CALM), International Game Technology (NYSE:IGT), and The Cheesecake Factory Incorporated (NASDAQ:CAKE). This group of stocks’ market caps are closest to LFL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DYN | 40 | 1175086 | -12 |
| CALM | 25 | 352484 | 3 |
| IGT | 20 | 481138 | 1 |
| CAKE | 20 | 168602 | -2 |
As you can see these stocks had an average of 26.25 hedge funds with bullish positions and the average amount invested in these stocks was $544 million. That figure was $19 million in LFL’s case. Dynegy Inc. (NYSE:DYN) is the most popular stock in this table. On the other hand International Game Technology (NYSE:IGT) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks LATAM Airlines Group SA (ADR) (NYSE:LFL) is even less popular than IGT. 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.
