It’s a green day on Wall Street as the Dow and S&P 500 are in record territory, while crude and Nasdaq futures are positive. Among the stocks heading in the right direction along with the market today are LATAM Airlines Group SA (ADR) (NYSE:LFL), Delta Air Lines, Inc. (NYSE:DAL), Southwest Airlines Co (NYSE:LUV), Shire PLC (ADR) (NASDAQ:SHPG), and Citigroup Inc (NYSE:C). Let’s find out why traders are buying these stock and see how top hedge funds are positioned in them.
Our backtests that covered the period between 1999 and 2012, showed that following the 15 most popular small-caps among hedge funds can help a retail investor beat the market by an average of 95 basis points per month (see the details here).
LATAM Flies on Investment
LATAM Airlines Group SA (ADR) (NYSE:LFL) shares have soared by 14% today after Qatar Airways announced that it will purchase as much as 10% of Latam for around $613 million. Latam will issue new stock at $10 per share to facilitate Qatar Airway’s purchase. Latam shares have done very well in 2016, soaring by 28% year-to-date even before today’s news. Five funds in our system have been the lucky beneficiaries of that robust price action, having held long positions in LATAM Airlines Group SA (ADR) (NYSE:LFL) at the end of the first quarter.
Better Than Expected Peer Results Ignite Airline Rally
Delta Air Lines, Inc. (NYSE:DAL) and Southwest Airlines Co (NYSE:LUV) are each up by around 3% after their peer United Continental Holdings Inc (NYSE:UAL) guided for stronger than expected passenger revenue per available seat mile for the second quarter. While the company expects second quarter 2016 consolidated passenger unit revenue to drop by 6.50%-to-6.75% year-over-year, that figure is better than had been anticipated. Also helping the two airlines rally today is the fact that both are reasonably cheap. Delta trades for a forward P/E of 6.22 while Southwest sports a forward earnings multiple of under ten. Due to Delta’s cheap valuation and the positive news from United, analysts at Deutsche Bank also upgraded Delta to ‘Buy’ from ‘Hold’ today. The analysts believe that much of the potential bad news, such as slow macro-economic growth and the Brexit, has already been priced into the stock.
According to our data, 97 top funds had a bullish position in Delta Air Lines, Inc. (NYSE:DAL) as of the most recent 13F reporting period. Southwest Airlines Co (NYSE:LUV) was a little less popular with the smart money crowd, with 58 funds reporting stakes in the company as of same period.
On the next page we examine why Shire PLC (ADR) and Citigroup are on the move this afternoon.