Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Spirit Airlines Incorporated (NASDAQ:SAVE)? The smart money sentiment can provide an answer to this question.
Is SAVE stock a buy? The smart money was selling. The number of bullish hedge fund bets retreated by 4 lately. Spirit Airlines Incorporated (NASDAQ:SAVE) was in 23 hedge funds’ portfolios at the end of December. The all time high for this statistic is 39. Our calculations also showed that SAVE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.
David Siegel of Two Sigma Advisors
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind let’s check out the key hedge fund action regarding Spirit Airlines Incorporated (NASDAQ:SAVE).
Do Hedge Funds Think SAVE Is A Good Stock To Buy Now?
Heading into the first quarter of 2021, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -15% from the previous quarter. On the other hand, there were a total of 37 hedge funds with a bullish position in SAVE a year ago. With the smart money’s sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
The largest stake in Spirit Airlines Incorporated (NASDAQ:SAVE) was held by PAR Capital Management, which reported holding $39.4 million worth of stock at the end of December. It was followed by Two Sigma Advisors with a $36.1 million position. Other investors bullish on the company included Millennium Management, Renaissance Technologies, and Point72 Asset Management. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Spirit Airlines Incorporated (NASDAQ:SAVE), around 5.17% of its 13F portfolio. Quaker Capital Investments is also relatively very bullish on the stock, earmarking 2.5 percent of its 13F equity portfolio to SAVE.
Judging by the fact that Spirit Airlines Incorporated (NASDAQ:SAVE) has faced falling interest from the entirety of the hedge funds we track, logic holds that there is a sect of money managers who sold off their entire stakes by the end of the fourth quarter. It’s worth mentioning that Ken Griffin’s Citadel Investment Group dumped the largest position of the 750 funds monitored by Insider Monkey, worth about $22.5 million in stock. Michael Platt and William Reeves’s fund, BlueCrest Capital Mgmt., also said goodbye to its stock, about $12.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 4 funds by the end of the fourth quarter.
Let’s now review hedge fund activity in other stocks similar to Spirit Airlines Incorporated (NASDAQ:SAVE). We will take a look at Workhorse Group, Inc. (NASDAQ:WKHS), Bottomline Technologies (NASDAQ:EPAY), Veoneer, Inc. (NASDAQ:VNE), Lions Gate Entertainment Corporation (NYSE:LGF-B), Albany International Corp. (NYSE:AIN), Sprouts Farmers Market Inc (NASDAQ:SFM), and AlloVir, Inc. (NASDAQ:ALVR). This group of stocks’ market valuations are similar to SAVE’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WKHS | 16 | 90839 | 3 |
| EPAY | 18 | 149869 | -3 |
| VNE | 11 | 195319 | 1 |
| LGF-B | 23 | 286809 | 1 |
| AIN | 13 | 35926 | -4 |
| SFM | 25 | 393603 | -2 |
| ALVR | 8 | 193537 | -3 |
| Average | 16.3 | 192272 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.3 hedge funds with bullish positions and the average amount invested in these stocks was $192 million. That figure was $214 million in SAVE’s case. Sprouts Farmers Market Inc (NASDAQ:SFM) is the most popular stock in this table. On the other hand AlloVir, Inc. (NASDAQ:ALVR) is the least popular one with only 8 bullish hedge fund positions. Spirit Airlines Incorporated (NASDAQ:SAVE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAVE is 62.8. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on SAVE as the stock returned 47.7% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Spirit Airlines Inc. (NASDAQ:SAVE)
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Disclosure: None. This article was originally published at Insider Monkey.
