Do Hedge Funds Love Alaska Air Group, Inc. (ALK)?

Many investors, including Carl Icahn or Stan Druckenmiller, have been saying for a while now that the current market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the third quarter, many investors lost money due to unpredictable events such as the concerns over Valeant’s drug pricing policy that led to an overall drop among pharma stocks. Nevertheless, many of the stocks that tanked in the third quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Alaska Air Group, Inc. (NYSE:ALK) changed recently.

Is Alaska Air Group, Inc. a buy right now? Investors who are in the know are reducing their bets on the stock. The number of bullish hedge fund bets shrunk by 4 lately. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Ralph Lauren Corp (NYSE:RL), Kimco Realty Corp (NYSE:KIM), and Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) to gather more data points.

With all of this in mind, let’s go over the fresh action surrounding Alaska Air Group, Inc. (NYSE:ALK).

What have hedge funds been doing with Alaska Air Group, Inc. (NYSE:ALK)?

Heading into Q4, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the previous quarter. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Jim Simons’s Renaissance Technologies has the biggest position in Alaska Air Group, Inc. (NYSE:ALK), worth close to $438.1 million, amounting to 1% of its total 13F portfolio. The second largest stake is held by PAR Capital Management, managed by Paul Reeder and Edward Shapiro, which holds a $361.7 million position; the fund has 7.6% of its 13F portfolio invested in the stock. Other members of the smart money that hold long positions include Cliff Asness’ AQR Capital Management, Brad Gerstner’s Altimeter Capital Management and Robert Bishop’s Impala Asset Management.

Due to the fact that Alaska Air Group, Inc. (NYSE:ALK) has witnessed a declination in interest from the smart money, it’s easy to see that there was a specific group of hedge funds that elected to cut their entire stakes in the third quarter. At the top of the heap, Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, valued at about $17.8 million in stock. George Soros’ fund, Soros Fund Management, also sold off its stock, about $6.4 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 4 funds in the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Alaska Air Group, Inc. (NYSE:ALK). We will take a look at Ralph Lauren Corp (NYSE:RL), Kimco Realty Corp (NYSE:KIM), Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX), and Kansas City Southern (NYSE:KSU). This group of stocks’ market valuations resemble ALK’s market valuation.

As you can see these stocks had an average of 32.5 hedge funds with bullish positions and the average amount invested in these stocks was $913 million. That figure was $1361 million in ALK’s case. Freeport-McMoRan Copper & Gold Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Kimco Realty Corp (NYSE:KIM) is the least popular one with only 13 bullish hedge fund positions. Alaska Air Group, Inc. (NYSE:ALK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard FCX might be a better candidate to consider a long position.