Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards Ryanair Holdings plc (NASDAQ:RYAAY).
Is Ryanair Holdings plc (NASDAQ:RYAAY) a buy, sell, or hold? The best stock pickers were becoming less hopeful. The number of long hedge fund positions shrunk by 5 recently. Ryanair Holdings plc (NASDAQ:RYAAY) was in 16 hedge funds’ portfolios at the end of September. The all time high for this statistic is 25. Our calculations also showed that RYAAY isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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. 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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Alan Fournier of Pennant Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s take a look at the latest hedge fund action regarding Ryanair Holdings plc (NASDAQ:RYAAY).
Do Hedge Funds Think RYAAY Is A Good Stock To Buy Now?
At third quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -24% from the previous quarter. By comparison, 22 hedge funds held shares or bullish call options in RYAAY a year ago. With the smart money’s sentiment swirling, there exists a few notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ryanair Holdings plc (NASDAQ:RYAAY), which was worth $243.3 million at the end of the third quarter. On the second spot was Immersion Capital which amassed $178.4 million worth of shares. Lansdowne Partners, Hosking Partners, and Woodson Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Immersion Capital allocated the biggest weight to Ryanair Holdings plc (NASDAQ:RYAAY), around 17.92% of its 13F portfolio. Teewinot Capital Advisers is also relatively very bullish on the stock, designating 13.81 percent of its 13F equity portfolio to RYAAY.
Due to the fact that Ryanair Holdings plc (NASDAQ:RYAAY) has experienced a decline in interest from the smart money, we can see that there is a sect of hedgies that decided to sell off their full holdings by the end of the third quarter. Interestingly, Bernard Horn’s Polaris Capital Management sold off the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $95.8 million in stock. Paul Singer’s fund, Elliott Investment Management, also dropped its stock, about $37.2 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 5 funds by the end of the third quarter.
Let’s go over hedge fund activity in other stocks similar to Ryanair Holdings plc (NASDAQ:RYAAY). These stocks are Xylem Inc (NYSE:XYL), NVR, Inc. (NYSE:NVR), CarMax Inc (NYSE:KMX), Altice USA, Inc. (NYSE:ATUS), Steris Plc (NYSE:STE), Ingersoll Rand Inc. (NYSE:IR), and SK Telecom Co., Ltd. (NYSE:SKM). This group of stocks’ market valuations resemble RYAAY’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XYL | 21 | 592977 | -1 |
| NVR | 42 | 1141650 | 3 |
| KMX | 54 | 1449835 | 8 |
| ATUS | 62 | 3526439 | 5 |
| STE | 30 | 676397 | -10 |
| IR | 26 | 758110 | -5 |
| SKM | 4 | 111261 | -4 |
| Average | 34.1 | 1179524 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1180 million. That figure was $660 million in RYAAY’s case. Altice USA, Inc. (NYSE:ATUS) is the most popular stock in this table. On the other hand SK Telecom Co., Ltd. (NYSE:SKM) is the least popular one with only 4 bullish hedge fund positions. Ryanair Holdings plc (NASDAQ:RYAAY) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for RYAAY is 29.5. 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on RYAAY as the stock returned 30% since the end of the third quarter (through 12/14) and outperformed the market by an even larger margin.
Follow Ryanair Holdings Plc (NASDAQ:RYAAY)
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Disclosure: None. This article was originally published at Insider Monkey.
