Were Hedge Funds Right About SkyWest, Inc. (SKYW)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the fourth quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 6 years and analyze what the smart money thinks of SkyWest, Inc. (NASDAQ:SKYW) based on that data.

Is SkyWest, Inc. (NASDAQ:SKYW) a buy, sell, or hold? The smart money was in an optimistic mood. The number of bullish hedge fund bets went up by 2 recently. SkyWest, Inc. (NASDAQ:SKYW) was in 17 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 19. Our calculations also showed that SKYW isn’t among the 30 most popular stocks among hedge funds (click for Q1 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Now let’s take a look at the key hedge fund action encompassing SkyWest, Inc. (NASDAQ:SKYW).

Do Hedge Funds Think SKYW Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in SKYW over the last 23 quarters. 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 SkyWest, Inc. (NASDAQ:SKYW) was held by Arrowstreet Capital, which reported holding $22.2 million worth of stock at the end of December. It was followed by Millennium Management with a $11.1 million position. Other investors bullish on the company included GLG Partners, Citadel Investment Group, and Kettle Hill Capital Management. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to SkyWest, Inc. (NASDAQ:SKYW), around 1.29% of its 13F portfolio. Engineers Gate Manager is also relatively very bullish on the stock, dishing out 0.09 percent of its 13F equity portfolio to SKYW.

As one would reasonably expect, key hedge funds were breaking ground themselves. PEAK6 Capital Management, managed by Matthew Hulsizer, established the most outsized call position in SkyWest, Inc. (NASDAQ:SKYW). PEAK6 Capital Management had $2.5 million invested in the company at the end of the quarter. Matthew Hulsizer’s PEAK6 Capital Management also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Dmitry Balyasny’s Balyasny Asset Management, Cliff Asness’s AQR Capital Management, and Peter Muller’s PDT Partners.

Let’s go over hedge fund activity in other stocks similar to SkyWest, Inc. (NASDAQ:SKYW). These stocks are Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT), Matador Resources Co (NYSE:MTDR), Clean Energy Fuels Corp (NASDAQ:CLNE), Veoneer, Inc. (NYSE:VNE), Noah Holdings Limited (NYSE:NOAH), Badger Meter, Inc. (NYSE:BMI), and Maxar Technologies Inc (NYSE:MAXR). All of these stocks’ market caps match SKYW’s market cap.

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As you can see these stocks had an average of 16.9 hedge funds with bullish positions and the average amount invested in these stocks was $302 million. That figure was $70 million in SKYW’s case. Rocket Pharmaceuticals, Inc. (NASDAQ:RCKT) is the most popular stock in this table. On the other hand Noah Holdings Limited (NYSE:NOAH) is the least popular one with only 12 bullish hedge fund positions. SkyWest, Inc. (NASDAQ:SKYW) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SKYW is 58.8. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately SKYW wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SKYW were disappointed as the stock returned -27.7% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.