Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Tipp Hill More Bullish Than Ever On Airline Stocks

Page 1 of 2

Richard L. Haydon’s Tipp Hill Capital Management LLC is a New York-based hedge fund founded in July 2009. Formerly known as Yield Capital Partners (Y/Cap Management), under which its filings are still listed, the fund has a two-pronged investment strategy: first, a value-oriented long/short approach and second, an approach targeting investments driven by catalysts such as M&As, spin-offs, or managerial changes. The former strategy focuses on companies with strong free cash flow generation, among other factors, and has an investment horizon of one-to-three years and a target return of 50% within two years, while investments under the latter approach last less than a year, with an annual return target of 20-30%. With its latest 13F out, it turns out that Tipp Hill is more bullish than ever on airline stocks such as Delta Air Lines, Inc. (NYSE:DAL)American Airlines Group Inc (NASDAQ:AAL),  Republic Airways Holdings Inc. (NASDAQ:RJET), and United Continental Holdings Inc (NYSE:UAL). All together, the four airlines make up almost a quarter of Tipp Hill’s equity portfolio. With an eye to the fundamentals, let’s take a closer look at these four airlines and Tipp Hill’s investment in them.

airplane, aircraft, flying


Why do we pay attention to hedge fund sentiment? Most investors ignore hedge funds’ moves because as a group their average net returns trailed the market since 2008 by a large margin. Unfortunately, most investors don’t realize that hedge funds are hedged and that they also charge an arm and a leg, so they are likely to underperform the market in a bull market. We ignore their short positions and by imitating hedge funds’ stock picks independently, we don’t have to pay them a dime. Our research has shown that hedge funds’ long stock picks generate strong risk-adjusted returns. For instance the 15 most popular small-cap stocks outperformed the S&P 500 Index by an average of 95 basis points per month in our back-tests spanning the 1999-2012 period. We have been tracking the performance of these stocks in real-time since the end of August 2012. After all, things change and we need to verify that back-test results aren’t just a statistical fluke. We weren’t proven wrong. These 15 stocks have managed to return 102% over the last 37 months and outperformed the S&P 500 Index by 53 percentage points (see the details here).

#4 Republic Airways Holdings Inc. (NASDAQ:RJET)

Shares held (as of September 30): 754,000
Total Value (as of September 30): $4.36 million
Percent of Portfolio (as of September 30): 4.46%

Republic Airways Holdings Inc. (NASDAQ:RJET)’s shares are down by an unsightly 61.8% year-to-date after the company missed analysts’ expectations for three straight quarters. The regional airline also recently ran into some trouble with another airline, Delta, which sued Republic Airways for failing to provide a full schedule of flights as previously promised. Delta is claiming direct damages of at least $1 million. Not all is lost, however. Analysts still think the company will be profitable next year, giving it a reasonable forward P/E of 9.82. If management can execute and crude prices don’t rally, Republic Airways Holdings could make a comeback. Ross Margolies‘ Stelliam Investment Management owns 5.01 million shares.

Follow Republic Airways Holdings Inc (NASDAQ:RJET)
Trade (NASDAQ:RJET) Now!

#3 United Continental Holdings Inc (NYSE:UAL)

Shares held (as of September 30): 94,000
Total Value (as of September 30): $4.99 million
Percent of Portfolio (as of September 30): 5.11%

United Continental Holdings Inc (NYSE:UAL) is down by 15% year-to-date on industry capacity concerns. Investors worry that the current boom times in the airline industry could cause airlines to overbuild and lead to oversupply in the future. The airline industry has certainly overbuilt multiple times before, although this time may be more suited to doing so, as the industry is more consolidated.  Given United Continental Holdings’ forward P/E of 6.56, it seems the market has already priced in a great deal of the risk. The position was a new one for Tipp Hill, and landed as the eighth most-valuable long position in its portfolio as of September 30. Thomas E. Claugus‘ GMT Capital owns 6.77 million shares as of June 30.

Follow United Continental Holdings Inc. (NYSE:UAL)
Trade (NYSE:UAL) Now!

The top two airline stock picks of Tipp Hill can be found on the following page.

Page 1 of 2

Biotech Stock Alert - 20% Guaranteed Return in One Year

Hedge Funds and Insiders Are Piling Into

One of 2015's best hedge funds and two insiders snapped up shares of this medical device stock recently. We believe its transformative and disruptive device will storm the $3+ billion market and help it achieve 500%-1000% gains in 3 years.

Get your FREE REPORT and the details of our 20% return guarantee today.

Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.
Loading Comments...

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 102% in 3 years!! Wondering How?

Download a complete edition of our newsletter for free!