We recently published a list of Top 10 Stocks to Buy According to SRS Investment Management. In this article, we are going to take a look at where United Airlines Holdings, Inc. (NASDAQ:UAL) stands against other top stocks to buy according to SRS Investment Management.
SRS Investment Management is a New York-based investment firm founded in 2006 by Karthik Sarma. The firm focuses on diverse investments across industries, including technology, media, telecommunications, consumer goods, and industrial sectors. It employs a research-driven approach to identify promising opportunities in global markets, leveraging its expertise to navigate complex financial landscapes.
As an investment advisory firm, SRS provides detailed insights into its business practices through its regulatory disclosures, although these are not verified by the SEC or state securities authorities. The firm emphasizes thorough due diligence when evaluating potential investments, gathering information on a company’s products, services, and market position. Its analytical approach includes engaging with industry experts, assessing supply and demand dynamics, and constructing financial models to project future performance and returns.
SRS primarily follows a global long/short equity strategy, aiming for high risk-adjusted returns while prioritizing capital preservation. The firm diversifies its investments across multiple industries and regions to mitigate risks. Its investment process involves extensive fundamental research, disciplined portfolio management, and strategic positioning in both long and short positions. This approach enables SRS to capitalize on market inefficiencies and generate sustainable returns.
Additionally, the firm runs a Focused Investment Program, targeting undervalued securities and acquiring significant positions at favorable prices. This strategy relies on active shareholder engagement, where SRS seeks positive responses from company management and stakeholders to influence corporate actions. The effectiveness of this strategy depends on how the market reacts to these initiatives and the willingness of companies to adopt changes proposed by shareholders. Through its meticulous investment approach, SRS aims to drive long-term value creation for its investors.
Karthik Sarma is an Indian billionaire hedge fund manager and the founder of SRS Investment Management, which he launched in 2006 after five years at Tiger Global Management. With a strong background in finance and investment, Sarma has also served as a director on Avis’s board since 2020, playing a key role in its strategic decisions. His educational background includes a bachelor’s degree from the Indian Institute of Technology Madras and a master’s degree from Princeton University. His professional journey began with three years at McKinsey & Co. as a consultant, where he gained experience in business strategy and financial analysis. He later joined Tiger Global Management, where he worked as a Managing Director from 2001 to 2005, honing his expertise in hedge fund management before establishing SRS Investment Management. Sarma’s ability to identify and capitalize on investment opportunities has positioned him as a highly influential figure in the hedge fund industry.
As an immigrant who moved to the United States for graduate studies, Sarma has built a reputation as a strategic investor with a disciplined approach to fund management. His experience across consulting, investment management, and corporate governance has contributed to his firm’s success. Through SRS, he continues to influence the financial landscape, focusing on long-term value creation for investors while maintaining a strong presence in key industries.
As of its latest filing for the fourth quarter of 2024, SRS Investment Management reported overseeing approximately $7 billion in 13F securities. The firm’s investment approach remains highly concentrated, with its top ten holdings accounting for 92.05% of total assets. This level of concentration suggests a high-conviction strategy, where SRS invests heavily in a select group of companies it believes offer strong long-term growth potential.
Our Methodology
The stocks discussed below were picked from SRS Investment Management’s Q4 2024 13F filings. They are compiled in the ascending order of the hedge fund’s stake in them as of December 31, 2024. To assist readers with more context, we have included the hedge fund sentiment regarding each stock using data from 1,009 hedge funds tracked by Insider Monkey in the fourth quarter of 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 373.4% since May 2014, beating its benchmark by 218 percentage points (see more details here).
A bird’s eye view of a large commercial jetliner taking off from an airport runway.
United Airlines Holdings, Inc. (NASDAQ:UAL)
Number of Hedge Fund Holders as of Q4: 86
SRS Investment Management’s Equity Stake: $281.70 Million
United Airlines Holdings, Inc. (NASDAQ:UAL), headquartered in Chicago’s Willis Tower, operates United Airlines and continues to demonstrate strong financial performance. In the fourth quarter of 2024, the company exceeded analyst expectations with earnings per share (EPS) of $3.26, surpassing the forecasted $2.93 by 11.3%. Revenue also outperformed estimates, reaching $14.7 billion against the anticipated $14.34 billion. Despite minor fluctuations, the company’s financial health remains solid, with significant liquidity and debt reduction efforts positioning it for continued stability.
Throughout 2024, United Airlines Holdings, Inc. (NASDAQ:UAL) focused on operational improvements and financial strength, reporting a full-year EPS of $10.61, which exceeded the midpoint of its guidance range. The airline improved its pre-tax margin to 9.7% in Q4, reflecting a 3.5 percentage point increase year-over-year. Additionally, United generated $3.4 billion in free cash flow and reduced net leverage to 2.4x while maintaining $17.4 billion in liquidity at year-end. Nearly half of its fleet has been upgraded with new interiors, reinforcing its commitment to enhancing the passenger experience and differentiating itself in an increasingly competitive airline industry.
Looking forward, United Airlines Holdings, Inc. (NASDAQ:UAL) projects EPS growth of approximately 18% at the midpoint for 2025, with estimates ranging from $11.50 to $13.50. The company plans to expand its fleet significantly, taking delivery of 71 new narrowbody and 10 widebody aircraft over the year. Additionally, fleet modernization efforts will continue, with 70% of aircraft interiors expected to be upgraded by the end of 2025. These investments signal United’s focus on efficiency, customer satisfaction, and long-term growth in a rapidly evolving travel landscape.
CEO Scott Kirby emphasized that 2024 served as further proof of United Airlines Holdings, Inc. (NASDAQ:UAL)’s progress toward achieving double-digit profit margins, while CFO Mike Leskinen highlighted the company’s success in “decommoditizing air travel.” By prioritizing operational improvements, financial discipline, and enhanced customer experience, the company positions itself as a leader in the airline industry, poised for sustainable growth and profitability in the years ahead.
Patient Capital Management stated the following regarding United Airlines Holdings, Inc. (NASDAQ:UAL) in its Q4 2024 investor letter:
“United Airlines Holdings, Inc. (NASDAQ:UAL) had a strong fourth quarter, gaining 70.2% in the period. The company benefitted from continued strong demand that surprised the market as well as the initiation of a buyback program, the first since COVID. There continues to be strong travel demand from both retail and business travelers. According to the International Air Transport Association (IATA), global air passenger travel is still below the pre-COVID implied trend path despite reaching a new all-time high this year. United’s focus on the customer over the last few years has led to strong improvement in net promoter scores (NPS) which should continue to flow through the model via better TRASM (total revenue per available seat mile) and higher cash flows and earnings. As of today, United alone accounts for ~30% of the overall industry’s profits. We expect this market share to grow and be defensible as we transition to an environment where customer service becomes the differentiating factor, and scale provides unparalleled ability to reinvest in the customer experience.”
Overall, UAL ranks 9th on our list of top stocks to buy according to SRS Investment Management. While we acknowledge the potential for UAL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than UAL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.