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 in recent 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 certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards American Airlines Group Inc (NASDAQ:AAL).
American Airlines Group Inc (NASDAQ:AAL) has seen an increase in activity from the world’s largest hedge funds of late. Our calculations also showed that AAL 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.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Bill Miller of Miller Value Partners
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. We’re going to check out the key hedge fund action surrounding American Airlines Group Inc (NASDAQ:AAL).
How are hedge funds trading American Airlines Group Inc (NASDAQ:AAL)?
Heading into the fourth quarter of 2019, a total of 38 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AAL over the last 17 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Berkshire Hathaway was the largest shareholder of American Airlines Group Inc (NASDAQ:AAL), with a stake worth $1178.6 million reported as of the end of September. Trailing Berkshire Hathaway was Lansdowne Partners, which amassed a stake valued at $198.2 million. AQR Capital Management, Cyrus Capital Partners, and Miller Value Partners 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 Cyrus Capital Partners allocated the biggest weight to American Airlines Group Inc (NASDAQ:AAL), around 8.94% of its portfolio. Kamunting Street Capital is also relatively very bullish on the stock, designating 6.76 percent of its 13F equity portfolio to AAL.
Now, key hedge funds were breaking ground themselves. AQR Capital Management, managed by Cliff Asness, initiated the most outsized position in American Airlines Group Inc (NASDAQ:AAL). AQR Capital Management had $67.8 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $15.3 million position during the quarter. The other funds with new positions in the stock are David Harding’s Winton Capital Management, Benjamin A. Smith’s Laurion Capital Management, and Israel Englander’s Millennium Management.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as American Airlines Group Inc (NASDAQ:AAL) but similarly valued. These stocks are Lyft, Inc. (NASDAQ:LYFT), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), BanColombia S.A. (NYSE:CIB), and Roku, Inc. (NASDAQ:ROKU). All of these stocks’ market caps match AAL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| LYFT | 33 | 880680 | -4 |
| XRAY | 28 | 1628924 | -1 |
| CIB | 11 | 166123 | 1 |
| ROKU | 37 | 322495 | 4 |
| Average | 27.25 | 749556 | 0 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $750 million. That figure was $1781 million in AAL’s case. Roku, Inc. (NASDAQ:ROKU) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks American Airlines Group Inc (NASDAQ:AAL) is more popular among hedge funds. 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. Hedge funds were also right about betting on AAL, though not to the same extent, as the stock returned 6.9% during the fourth quarter (through the end of November) and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.
