As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about United Airlines Holdings Inc (NASDAQ:UAL).
United Airlines Holdings Inc (NASDAQ:UAL) investors should pay attention to a decrease in hedge fund interest in recent months. United Airlines Holdings Inc (NASDAQ:UAL) was in 30 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 73. Our calculations also showed that UAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to take a glance at the new hedge fund action surrounding United Airlines Holdings Inc (NASDAQ:UAL).
Paul Reeder of PAR Capital Management
Do Hedge Funds Think UAL Is A Good Stock To Buy Now?
At third quarter’s end, a total of 30 of the hedge funds tracked by Insider Monkey were long this stock, a change of -23% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards UAL over the last 25 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in United Airlines Holdings Inc (NASDAQ:UAL) was held by Citadel Investment Group, which reported holding $374.8 million worth of stock at the end of September. It was followed by PAR Capital Management with a $176 million position. Other investors bullish on the company included Masters Capital Management, D E Shaw, and GLG Partners. In terms of the portfolio weights assigned to each position Jade Capital Advisors allocated the biggest weight to United Airlines Holdings Inc (NASDAQ:UAL), around 6.26% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, designating 4.62 percent of its 13F equity portfolio to UAL.
Because United Airlines Holdings Inc (NASDAQ:UAL) has witnessed falling interest from the smart money, logic holds that there lies a certain “tier” of funds who sold off their positions entirely last quarter. At the top of the heap, Brad Gerstner’s Altimeter Capital Management dumped the biggest position of the “upper crust” of funds watched by Insider Monkey, totaling about $150.1 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund sold off about $52.1 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 9 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to United Airlines Holdings Inc (NASDAQ:UAL). These stocks are Sociedad Química y Minera de Chile S.A. (NYSE:SQM), Paylocity Holding Corp (NASDAQ:PCTY), Nomura Holdings, Inc. (NYSE:NMR), The AES Corporation (NYSE:AES), Incyte Corporation (NASDAQ:INCY), Arch Capital Group Ltd. (NASDAQ:ACGL), and Smith & Nephew plc (NYSE:SNN). This group of stocks’ market values are similar to UAL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SQM | 26 | 211676 | 7 |
| PCTY | 27 | 740385 | 8 |
| NMR | 6 | 19317 | -1 |
| AES | 47 | 1481369 | 8 |
| INCY | 37 | 3295444 | 3 |
| ACGL | 31 | 1214570 | 9 |
| SNN | 19 | 106245 | 6 |
| Average | 27.6 | 1009858 | 5.7 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.6 hedge funds with bullish positions and the average amount invested in these stocks was $1010 million. That figure was $403 million in UAL’s case. The AES Corporation (NYSE:AES) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 6 bullish hedge fund positions. United Airlines Holdings Inc (NASDAQ:UAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UAL is 37.6. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.6% in 2021 through November 30th and beat the market again by 5.6 percentage points. Unfortunately UAL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UAL were disappointed as the stock returned -11.2% since the end of September (through 11/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
