Is United Continental Holdings Inc (NYSE:UAL) a good bet right now? We like to analyze hedge fund sentiment before doing days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy league graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments (for some reason media paid a ton of attention to Ackman’s gigantic JC Penney and Valeant failures) and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
United Continental Holdings Inc (NYSE:UAL) has seen an increase in hedge fund sentiment during the third quarter, as there were 63 funds holding shares at the end of September, compared to 57 funds at the end of June. However, the level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as CA, Inc. (NASDAQ:CA), Verisk Analytics, Inc. (NASDAQ:VRSK), and Potash Corp./Saskatchewan (USA) (NYSE:POT) to gather more data points.
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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.
With all of this in mind, let’s check out the new action surrounding United Continental Holdings Inc (NYSE:UAL).
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How are hedge funds trading United Continental Holdings Inc (NYSE:UAL)?
Heading into the fourth quarter of 2016, 63 funds tracked by Insider Monkey were long this stock, up by 11% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, PAR Capital Management, led by Paul Reeder and Edward Shapiro, holds the number one position in United Continental Holdings Inc (NYSE:UAL). PAR Capital Management has a $855 million position in the stock, comprising 12.3% of its 13F portfolio. Coming in second is Altimeter Capital Management, led by Brad Gerstner, holding a $603.9 million position; the fund has 39.7% of its 13F portfolio invested in the stock. Other professional money managers that hold long positions contain Cliff Asness’ AQR Capital Management, Thomas E. Claugus’s GMT Capital, and Warren Buffett’s Berkshire Hathaway.
As aggregate interest increased, key hedge funds were leading the bulls’ herd. Berkshire Hathaway, managed by Warren Buffett, created the largest position in United Continental Holdings Inc (NYSE:UAL). Berkshire Hathaway had $237.8 million invested in the company at the end of the quarter. Mike Masters’s Masters Capital Management also initiated a $52.5 million position during the quarter. The following funds were also among the new UAL investors: Ken Griffin’s Citadel Investment Group, Rob Citrone’s Discovery Capital Management, and Robert Polak’s Anchor Bolt Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as United Continental Holdings Inc (NYSE:UAL) but similarly valued. We will take a look at CA, Inc. (NASDAQ:CA), Verisk Analytics, Inc. (NASDAQ:VRSK), Potash Corp./Saskatchewan (USA) (NYSE:POT), and SBA Communications Corporation (NASDAQ:SBAC). This group of stocks’ market valuations are similar to UAL’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CA | 30 | 363061 | -1 |
| VRSK | 23 | 592297 | -2 |
| POT | 18 | 237545 | -14 |
| SBAC | 43 | 2363716 | 3 |
As you can see these stocks had an average of 29 funds with bullish positions at the end of September and the average amount invested in these stocks was $889 million. That figure was $3.74 billion in UAL’s case. SBA Communications Corporation (NASDAQ:SBAC) is the most popular stock in this table. On the other hand Potash Corp./Saskatchewan (USA) (NYSE:POT) is the least popular one with only 18 investors holding shares. Compared to these stocks United Continental Holdings Inc (NYSE:UAL) 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.
