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Smart Money Sentiment in Southwest Airlines Co (LUV) Taking Off: Why Are They So Hyped?

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You probably know from experience that there is not as much information on small-cap companies as there is on large companies. Of course, this makes it really hard and difficult for individual investors to make proper and accurate analysis of certain small-cap companies. However, well-known and successful hedge fund investors like Carl Icahn and George Soros hold the necessary resources and abilities to conduct an extensive stock analysis on small-cap stocks, which enable them to make millions of dollars by identifying potential winners within the small-cap galaxy of stocks. This represents the main reason why Insider Monkey takes notice of the hedge fund activity in these overlooked stocks.

Southwest Airlines Co (NYSE:LUV) investors should pay attention to an increase in hedge fund interest in recent months. 53 hedge funds that we track were long the stock on September 30. There were 45 hedge funds in our database with LUV holdings at the end of the previous quarter. At the end of this article we will also compare LUV to other stocks including Baxter International Inc. (NYSE:BAX), China Unicom (Hong Kong) Limited (ADR) (NYSE:CHU), and CSX Corporation (NYSE:CSX) to get a better sense of its popularity.

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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.

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

At Q3’s end, a total of 53 of the hedge funds tracked by Insider Monkey were long this stock, an 18% rise from the second quarter of 2016. On the other hand, there were a total of 52 hedge funds with a bullish position in LUV at the beginning of this year, so ownership of the stock is nearly flat in 2016. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

HedgeFundSentimentChart

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Egerton Capital Limited, led by John Armitage, holds the biggest position in Southwest Airlines Co (NYSE:LUV). Egerton Capital Limited has a $473.1 million position in the stock, comprising 5.4% of its 13F portfolio. The second largest stake is held by Cliff Asness’ AQR Capital Management, with a $256.6 million position. Remaining peers with similar optimism consist of Paul Reeder and Edward Shapiro’s PAR Capital Management, Doug Silverman and Alexander Klabin’s Senator Investment Group, and Robert Polak’s Anchor Bolt Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

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