4 Best Airline Stocks to Buy According to Hedge Funds

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In this article, we discuss the 4 best airline stocks to buy according to hedge funds. If you want to see our detailed analysis of these stocks, go directly to the 9 Best Airline Stocks to Buy According to Hedge Funds.

4. Alaska Air Group, Inc. (NYSE:ALK)

Number of Hedge Fund Holders: 38

Washington-based Alaska Air Group, Inc. (NYSE:ALK) is an airline holding company. The firm provides air services to passengers through its three segments: Alaska Mainline, Alaska Regional and Horizon Air. The airline company is ranked fourth on our list of the 9 best airline stocks to buy according to hedge funds.

In its earnings results for the second quarter of 2021, the firm reported earnings per share of -$0.30, beating market estimates by $0.14. The revenue for the quarter was reported to be $1.53 billion, an increase of 262.71% on a year-over-year basis, surpassing predictions by $9.22 million.

By the end of the second quarter of 2021, 38 hedge funds out of the 873 tracked by Insider Monkey held stakes in Alaska Air Group, Inc. (NYSE:ALK) worth roughly $505.8 million. This is compared to 32 hedge funds in the previous quarter with a total stake value of approximately $587.9 million.

On October 1, JPMorgan analyst Jamie Baker raised his price target on Alaska Air Group, Inc. (NYSE:ALK) to $97 from $94, and kept an Overweight rating on the shares.

In its Q1 2021 investor letter, White Brook Capital, an asset management firm, explains why it sold its shares of Alaska Air Group, Inc. (NYSE:ALK). Here is what the fund said:

“Despite initiating a position in the fourth quarter, Alaska Airlines Group, Inc (ALK) was sold during the first quarter. The Alaska Airlines investment was envisioned to be a long-term investment, but the stock price appreciated more quickly than expected. Like many other “re-open trades”, the value of the company including its debt now exceeds the value pre-pandemic. For that to be reasonable I’d have to believe:

1) The company/industry had too little debt and by adding debt they’ve better optimized their balance sheet for equity returns while still maintaining downside resiliency;

2) The company/industry’s profitability will be better moving forward than it was pre-pandemic and therefore warrant a higher multiple; and/or

3) The company/industry was significantly mispriced before the pandemic.

The first was true of Alaska Airlines pre-pandemic, but the certainty one can have about the second and third is not high enough to compel continued investment at today’s prices. The intended long-term position turned into a short-term trade with an exceptional IRR.”

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