Investing in hedge funds can bring large profits, but it’s not for everybody, since hedge funds are available only for high-net-worth individuals. They generate significant returns for investors to justify their large fees and they allocate a lot of time and employ a complex analysis to determine the best stocks to invest in. A particularly interesting group of stocks that hedge funds like is the small-caps. The huge amount of capital does not allow hedge funds to invest a lot in small-caps, but our research showed that their most popular small-cap ideas are less efficiently priced and generate stronger returns than their large- and mega-cap picks and the broader market. That is why we follow the hedge fund activity in the small-cap space.
Is Alaska Air Group, Inc. (NYSE:ALK) a buy, sell, or hold? Investors who are in the know are getting less bullish. The number of long hedge fund bets were cut by 6 lately. At the end of this article we will also compare ALK to other stocks including Open Text Corporation (USA) (NASDAQ:OTEX), Western Gas Partners, LP (NYSE:WES), and ITC Holdings Corp. (NYSE:ITC) to get a better sense of its popularity.
Follow Alaska Air Group Inc. (NYSE:ALK)
Follow Alaska Air Group Inc. (NYSE:ALK)
At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.
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Now, let’s review the new action regarding Alaska Air Group, Inc. (NYSE:ALK).
What have hedge funds been doing with Alaska Air Group, Inc. (NYSE:ALK)?
Heading into the fourth quarter of 2016, a total of 36 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 14% drop from one quarter earlier. With the smart money’s capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the largest position in Alaska Air Group, Inc. (NYSE:ALK), worth close to $299.8 million, amounting to 4.3% of its total 13F portfolio. The second largest stake is held by Renaissance Technologies, managed by Jim Simons, which holds a $160.4 million position. Other hedge funds and institutional investors with similar optimism encompass Israel Englander’s Millennium Management, Robert Polak’s Anchor Bolt Capital and Brad Gerstner’s Altimeter Capital Management.
Because Alaska Air Group, Inc. (NYSE:ALK) has witnessed a decline in interest from the smart money, logic holds that there were a few funds who sold off their entire stakes in the third quarter. Interestingly, Anand Parekh’s Alyeska Investment Group said goodbye to the largest position of the 700 funds monitored by Insider Monkey, worth an estimated $6.9 million in stock, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital was right behind this move, as the fund sold off about $6.9 million worth of shares. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds in the third quarter.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Alaska Air Group, Inc. (NYSE:ALK) but similarly valued. These stocks are Open Text Corporation (USA) (NASDAQ:OTEX), Western Gas Partners, LP (NYSE:WES), ITC Holdings Corp. (NYSE:ITC), and Ashland Inc. (NYSE:ASH). This group of stocks’ market valuations resemble ALK’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OTEX | 20 | 186078 | 1 |
| WES | 8 | 35122 | 3 |
| ITC | 35 | 1770861 | 0 |
| ASH | 30 | 726535 | 4 |
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $680 million. That figure was $997 million in ALK’s case. ITC Holdings Corp. (NYSE:ITC) is the most popular stock in this table. On the other hand Western Gas Partners, LP (NYSE:WES) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Alaska Air Group, Inc. (NYSE:ALK) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
