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Did Hedge Funds Drop The Ball On SkyWest, Inc. (SKYW) ?

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The Standard and Poor’s 500 Index returned approximately 13.1% in the first 2.5 months of this year (including dividend payments). Conversely, hedge funds’ top 15 large-cap stock picks generated a return of 19.7% during the same 2.5-month period, with 93% of these stock picks outperforming the broader market benchmark. Coincidence? It might happen to be so, but it is unlikely. Our research covering the last 18 years indicates that hedge funds’ stock picks generate superior risk-adjusted returns. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like SkyWest, Inc. (NASDAQ:SKYW).

SkyWest, Inc. (NASDAQ:SKYW) has experienced a decrease in hedge fund interest recently. Our calculations also showed that SKYW isn’t among the 30 most popular stocks among hedge funds.

In the 21st century investor’s toolkit there are many metrics stock market investors employ to appraise stocks. A couple of the best metrics are hedge fund and insider trading moves. Our experts have shown that, historically, those who follow the top picks of the top fund managers can trounce the broader indices by a healthy margin (see the details here).

RENAISSANCE TECHNOLOGIES

Let’s view the new hedge fund action regarding SkyWest, Inc. (NASDAQ:SKYW).

Hedge fund activity in SkyWest, Inc. (NASDAQ:SKYW)

At the end of the fourth quarter, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -7% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards SKYW over the last 14 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SKYW_apr2019

Among these funds, Renaissance Technologies held the most valuable stake in SkyWest, Inc. (NASDAQ:SKYW), which was worth $101.6 million at the end of the third quarter. On the second spot was Marshall Wace LLP which amassed $23.3 million worth of shares. Moreover, AQR Capital Management, Citadel Investment Group, and Brant Point Investment Management were also bullish on SkyWest, Inc. (NASDAQ:SKYW), allocating a large percentage of their portfolios to this stock.

Due to the fact that SkyWest, Inc. (NASDAQ:SKYW) has witnessed bearish sentiment from hedge fund managers, it’s easy to see that there exists a select few funds that elected to cut their entire stakes last quarter. It’s worth mentioning that Richard Driehaus’s Driehaus Capital sold off the largest investment of the “upper crust” of funds followed by Insider Monkey, totaling close to $2.6 million in stock, and John Overdeck and David Siegel’s Two Sigma Advisors was right behind this move, as the fund dumped about $0.8 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 1 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SkyWest, Inc. (NASDAQ:SKYW) but similarly valued. We will take a look at Prospect Capital Corporation (NASDAQ:PSEC), Brandywine Realty Trust (NYSE:BDN), Colony Capital Inc (NYSE:CLNY), and Viavi Solutions Inc (NASDAQ:VIAV). All of these stocks’ market caps are closest to SKYW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PSEC 11 29955 0
BDN 17 105044 2
CLNY 26 334123 1
VIAV 26 175280 4
Average 20 161101 1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $161 million. That figure was $139 million in SKYW’s case. Colony Capital Inc (NYSE:CLNY) is the most popular stock in this table. On the other hand Prospect Capital Corporation (NASDAQ:PSEC) is the least popular one with only 11 bullish hedge fund positions. SkyWest, Inc. (NASDAQ:SKYW) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on SKYW as the stock returned 32.5% and outperformed the market by an even larger margin.

Disclosure: None. This article was originally published at Insider Monkey.

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