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Does Delta Air Lines, Inc. (DAL)’s Expanded NBA Deal Make It A Buy?

One of the most preferred airlines in America, Delta Air Lines, Inc. (NYSE:DALis all set to improve the flying experience of the growing list of NBA stars and teams it transports around the country (and occasionally outside of it, to Toronto) dozens of times annually. In a tentative agreement between the airliner and the National Basketball Association charters, the airline company will replace Airbus A319s with Boeing 757-200s planes for the upcoming basketball season. As per the accord, Delta Air Lines, Inc. (NYSE:DAL) is likely to add four more teams to the list of teams it transports during the season, as it will fly as many as 27 teams during the upcoming season, in which the recently crowned Golden State Warriors will be looking to defend their title. The arrangement indicates the importance that the airliner places towards flying its select group of customers.

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Delta will use 11 Boeing 757-200s for ferrying NBA players throughout the season. More legroom and swiveling seats are not the only features offered in these flights, as the crew pays special attention towards the food preference of individual players. If the agreement is sealed with the replacement of Airbus A319s with Boeing 757-200s, Delta Air Lines, Inc. (NYSE:DAL) would make the 126-seat A319s available for public trips again, taking the place of some of the 180-seat 757-200s, which might drive airfares and margins higher for those flights.

It has been somewhat of a volatile year for the shares of Delta Air Lines, Inc. (NYSE:DAL), which have declined 18.75% year-to-date. Despite the decline in share price, the smart money maintains a positive outlook on the stock, with 116 hedge fund managers tracked by Insider Monkey holding positions in the company worth $7.15 billion as of March 31. One quarter earlier, 110 hedge fund investors had $7.53 billion invested in the airliner; however, the decline in aggregate investments can be contributed to Delta Air Lines, Inc. (NYSE:DAL)’s volatile stock, which dipped by over 8% during the first quarter. Thus overall hedge fund interest was slightly positive.

Why are we interested in the 13F filings of a select group of hedge funds? We use these filings to determine the top 15 small-cap stocks held by these elite funds based on 16 years of research that showed their top small-cap picks are much more profitable than both their large-cap stocks and the broader market as a whole. These small-cap stocks beat the S&P 500 Total Return Index by an average of nearly one percentage point per month in our backtests, which were conducted over the period of 1999 to 2012. Moreover, since the beginning of forward testing from August 2012, the strategy worked just as our research predicted, outperforming the market every year and returning 135% over the last 34 months, which is more than 80 percentage points higher than the returns of the S&P 500 ETF (SPY) (see more details).

Along with positive hedge fund sentiment, the insiders are expecting growth in Delta Air Lines, Inc. (NYSE:DAL)’s stock, with three insiders purchasing shares in the past six months. George Mattson, Director at Delta Air Lines, added 5,000 shares of the company to his portfolio along, while fellow directors William H. Easter and Francis Blake added 3,500 and 5,000 shares respectively.

With positive insider and hedge fund sentiment, Delta Air Lines is expected to post better results in the upcoming quarter. Let’s take a look at the recent hedge fund movements concerning the stock of the airliner.

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