Last year’s fourth quarter was a rough one for investors and many hedge funds, which were naturally unable to overcome the big dip in the broad market, as the S&P 500 fell by about 4.8% during 2018 and average hedge fund losing about 1%. The Russell 2000, composed of smaller companies, performed even worse, trailing the S&P by more than 6 percentage points, as investors fled less-known quantities for safe havens. Luckily hedge funds were shifting their holdings into large-cap stocks. The 20 most popular hedge fund stocks actually generated an average return of 41.1% in 2019 (through December 23) and outperformed the S&P 500 ETF by more than 10 percentage points. In this article we will study how hedge fund sentiment towards United Continental Holdings Inc (NYSE:UAL) changed during the third quarter and how the stock performed in comparison to hedge fund consensus stocks.
United Continental Holdings Inc (NYSE:UAL) was in 46 hedge funds’ portfolios at the end of the third quarter of 2019. UAL has experienced a decrease in activity from the world’s largest hedge funds of late. There were 47 hedge funds in our database with UAL positions at the end of the previous quarter. Our calculations also showed that UAL isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).
If you’d ask most investors, hedge funds are seen as worthless, outdated financial tools of years past. While there are greater than 8000 funds trading at the moment, Our researchers hone in on the upper echelon of this group, around 750 funds. These money managers command bulk of all hedge funds’ total capital, and by following their first-class equity investments, Insider Monkey has formulated a few investment strategies that have historically defeated the broader indices. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Warren Buffett of Berkshire Hathaway
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager’s investor letter and the stock already gained 20 percent. With all of this in mind we’re going to go over the new hedge fund action encompassing United Continental Holdings Inc (NYSE:UAL).
What have hedge funds been doing with United Continental Holdings Inc (NYSE:UAL)?
At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -2% from the second quarter of 2019. By comparison, 43 hedge funds held shares or bullish call options in UAL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in United Continental Holdings Inc (NYSE:UAL) was held by Berkshire Hathaway, which reported holding $1939.6 million worth of stock at the end of September. It was followed by PAR Capital Management with a $1241.8 million position. Other investors bullish on the company included Altimeter Capital Management, Lansdowne Partners, and AQR Capital Management. In terms of the portfolio weights assigned to each position Cyrus Capital Partners allocated the biggest weight to United Continental Holdings Inc (NYSE:UAL), around 26.09% of its 13F portfolio. Altimeter Capital Management is also relatively very bullish on the stock, dishing out 25.49 percent of its 13F equity portfolio to UAL.
Seeing as United Continental Holdings Inc (NYSE:UAL) has witnessed bearish sentiment from the smart money, we can see that there is a sect of hedgies who sold off their entire stakes by the end of the third quarter. Intriguingly, Gregg Moskowitz’s Interval Partners sold off the largest stake of all the hedgies monitored by Insider Monkey, worth about $79.6 million in stock, and Anand Parekh’s Alyeska Investment Group was right behind this move, as the fund dropped about $64.5 million worth. These moves are important to note, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let’s also examine 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 Royal Caribbean Cruises Ltd. (NYSE:RCL), KKR & Co Inc. (NYSE:KKR), Synchrony Financial (NYSE:SYF), and Veeva Systems Inc (NYSE:VEEV). This group of stocks’ market caps are closest to UAL’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RCL | 45 | 1672773 | -1 |
| KKR | 41 | 3227093 | 5 |
| SYF | 43 | 2375436 | -3 |
| VEEV | 33 | 1020379 | -2 |
| Average | 40.5 | 2073920 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.5 hedge funds with bullish positions and the average amount invested in these stocks was $2074 million. That figure was $7091 million in UAL’s case. Royal Caribbean Cruises Ltd. (NYSE:RCL) is the most popular stock in this table. On the other hand Veeva Systems Inc (NYSE:VEEV) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks United Continental Holdings Inc (NYSE:UAL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately UAL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on UAL were disappointed as the stock returned 6.8% so far in 2019 (through 12/23) and trailed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 65 percent of these stocks already outperformed the market in 2019.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
