4 Best Airline Stocks to Buy According to Hedge Funds

2. Southwest Airlines Co. (NYSE:LUV)

Number of Hedge Fund Holders: 49

Southwest Airlines Co. (NYSE:LUV) is a major American airline company, and is the world’s largest low-cost air carrier. The company provides passenger airline services through its fleet of over 718 aircraft that travel to 121 destinations in the world. The airline firm ranks second on our list of the 9 best airline stocks to buy according to hedge funds.

On October 4, Barclays analyst Brandon Oglenski upgraded Southwest Airlines Co. (NYSE:LUV) to Overweight from Equal Weight, with a price target of $75, up from $64.

The company last released its quarterly earnings report on July 22, with earnings per share at -$0.35, falling short of the market estimates by $0.12. On the other hand, the company reported revenues at $4.01 billion, an increase of over 297.62% on a year-over-year basis, surpassing market predictions by $69.46 million.

By the end of the second quarter of 2021, 49 hedge funds out of the 873 tracked by Insider Monkey held stakes in Southwest Airlines Co. (NYSE:LUV) worth roughly $926 million. This is compared to 52 hedge funds in the previous quarter with a total stake value of approximately $747 million.

In its Q1 2021 investor letter, ClearBridge Investments, an asset management firm, highlighted a few stocks and Southwest Airlines Co. (NYSE:LUV) was one of them. Here is what the fund said:

“One of our goals as we constantly monitor the portfolio is to see if we can better deploy capital by lowering the probability of being wrong. This motivation drove our swap of Delta Airlines into Southwest Airlines during the quarter. We expect a huge rebound in airline traffic as COVID-19 concerns abate, but we are much more comfortable that it will be led by leisure travel. Conversely, we are more uncertain of the ultimate level and timing of business travel demand. Southwest, with its simple fare strategy and high leisure travel exposure, is better positioned to capture the ongoing traffic rebound without having to answer the business travel demand question on which Delta is more dependent. As a result, we expect Southwest to play serious offense as it gains share in the rebounding travel market and can fully leverage the massive pent-up demand for travel that we expect. In addition, the U.S. lead in vaccination over Europe favors Southwest over Delta, given the domestic focus of Southwest. COVID-19 has changed many things, but humans by their very nature like to move, and many of them will do it on Southwest.”