What Hedge Funds Think About Southwest Airlines Co. (LUV)

At the moment, there are plenty of methods investors can use to monitor Mr. Market. A pair of the most under-the-radar are hedge fund and insider trading movement. At Insider Monkey, our studies have shown that, historically, those who follow the top picks of the elite money managers can beat their index-focused peers by a very impressive amount (see just how much).

Equally as useful, positive insider trading sentiment is another way to look at the stock market universe. There are plenty of stimuli for an executive to drop shares of his or her company, but only one, very simple reason why they would initiate a purchase. Many academic studies have demonstrated the useful potential of this strategy if investors understand what to do (learn more here).

Keeping this in mind, let’s study the newest info for Southwest Airlines Co. (NYSE:LUV).

How are hedge funds trading Southwest Airlines Co. (NYSE:LUV)?

In preparation for the third quarter, a total of 29 of the hedge funds we track were long in this stock, a change of -9% from the previous quarter. With hedgies’ capital changing hands, there exists a few notable hedge fund managers who were increasing their holdings meaningfully.

When using filings from the hedgies we track, Greenhaven Associates, managed by Edgar Wachenheim, holds the biggest position in Southwest Airlines Co. (NYSE:LUV). Greenhaven Associates has a $141.9 million position in the stock, comprising 3.8% of its 13F portfolio. Coming in second is Ric Dillon of Diamond Hill Capital, with a $99.8 million position; 1.1% of its 13F portfolio is allocated to the company. Some other peers that hold long positions include Louis Navellier’s Navellier & Associates, Cliff Asness’s AQR Capital Management and Paul Marshall and Ian Wace’s Marshall Wace LLP.

Since Southwest Airlines Co. (NYSE:LUV) has faced declining interest from the top-tier hedge fund industry, logic holds that there were a few fund managers that elected to cut their entire stakes heading into Q2. At the top of the heap, Edward A. Mule’s Silver Point Capital said goodbye to the largest investment of the 450+ funds we monitor, comprising an estimated $4 million in stock. Robert Raiff’s fund, Raiff Partners, also cut its stock, about $2.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds heading into Q2.

Insider trading activity in Southwest Airlines Co. (NYSE:LUV)

Insider buying made by high-level executives is at its handiest when the company in focus has seen transactions within the past 180 days. Over the latest 180-day time frame, Southwest Airlines Co. (NYSE:LUV) has seen zero unique insiders purchasing, and zero insider sales (see the details of insider trades here).

We’ll check out the relationship between both of these indicators in other stocks similar to Southwest Airlines Co. (NYSE:LUV). These stocks are JetBlue Airways Corporation (NASDAQ:JBLU), Alaska Air Group, Inc. (NYSE:ALK), Copa Holdings, S.A. (NYSE:CPA), Ryanair Holdings plc (ADR) (NASDAQ:RYAAY), and LATAM Airlines Group SA (ADR) (NYSE:LFL). This group of stocks belong to the regional airlines industry and their market caps match LUV’s market cap.