The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 887 13F filings submitted by hedge funds and prominent investors. These filings show these funds’ portfolio positions as of December 31st, 2020. In this article we are going to take a look at smart money sentiment towards Southwest Airlines Co. (NYSE:LUV).
Is LUV stock a buy or sell? Southwest Airlines Co. (NYSE:LUV) has experienced an increase in hedge fund interest of late. Southwest Airlines Co. (NYSE:LUV) was in 55 hedge funds’ portfolios at the end of December. The all time high for this statistic is 58. Our calculations also showed that LUV isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
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 monthly stock picks returned 197% since March 2017 and outperformed the S&P 500 ETFs by more than 124 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.
Paul Reeder of PAR Capital Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. Recently Oregon became the first state to legalize psychedelic mushrooms which are shown to have promising results in treating depression, addiction, and PTSD in early stage academic studies. So, we are checking out this psychedelic drug stock idea right now. We go through lists like the 10 best biotech stocks to invest in to pick the next stock 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. 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 homepage (or at the end of this article). Keeping this in mind we’re going to take a gander at the fresh hedge fund action surrounding Southwest Airlines Co. (NYSE:LUV).
Do Hedge Funds Think LUV Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 55 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. On the other hand, there were a total of 44 hedge funds with a bullish position in LUV a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, PAR Capital Management held the most valuable stake in Southwest Airlines Co. (NYSE:LUV), which was worth $116.5 million at the end of the fourth quarter. On the second spot was Orbis Investment Management which amassed $74.3 million worth of shares. Renaissance Technologies, Millennium Management, and Citadel Investment Group 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 Jade Capital Advisors allocated the biggest weight to Southwest Airlines Co. (NYSE:LUV), around 6.02% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, dishing out 3.4 percent of its 13F equity portfolio to LUV.
As one would reasonably expect, key money managers have been driving this bullishness. Athanor Capital, managed by Parvinder Thiara, initiated the most outsized position in Southwest Airlines Co. (NYSE:LUV). Athanor Capital had $33.5 million invested in the company at the end of the quarter. Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners also initiated a $29.1 million position during the quarter. The other funds with new positions in the stock are Israel Englander’s Millennium Management, Stephen J. Errico’s Locust Wood Capital Advisers, and Noam Gottesman’s GLG Partners.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Southwest Airlines Co. (NYSE:LUV) but similarly valued. We will take a look at Corning Incorporated (NYSE:GLW), Splunk Inc (NASDAQ:SPLK), NatWest Group plc (NYSE:NWG), Nutrien Ltd. (NYSE:NTR), Willis Towers Watson Public Limited Company (NASDAQ:WLTW), Mettler-Toledo International Inc. (NYSE:MTD), and Sirius XM Holdings Inc (NASDAQ:SIRI). This group of stocks’ market values are similar to LUV’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GLW | 39 | 334973 | 3 |
| SPLK | 47 | 1036156 | 3 |
| NWG | 3 | 759 | 1 |
| NTR | 25 | 754698 | -1 |
| WLTW | 58 | 3245691 | 7 |
| MTD | 29 | 850200 | -1 |
| SIRI | 32 | 670253 | -5 |
| Average | 33.3 | 984676 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 33.3 hedge funds with bullish positions and the average amount invested in these stocks was $985 million. That figure was $758 million in LUV’s case. Willis Towers Watson Public Limited Company (NASDAQ:WLTW) is the most popular stock in this table. On the other hand NatWest Group plc (NYSE:NWG) is the least popular one with only 3 bullish hedge fund positions. Southwest Airlines Co. (NYSE:LUV) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for LUV is 84.7. 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 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on LUV as the stock returned 31% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.
