Hedge Funds Aren’t Crazy About American Airlines Group Inc (AAL) Anymore

At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31. In this article, we will use that wealth of knowledge to determine whether or not American Airlines Group Inc (NASDAQ:AAL) makes for a good investment right now.

Is American Airlines Group Inc (NASDAQ:AAL) a cheap investment today? Prominent investors are getting less optimistic. The number of long hedge fund positions were trimmed by 4 recently. Our calculations also showed that aal isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Warren Buffet, is Warren Buffet success personified, Suzanne Woolley

Warren Buffett of Berkshire Hathaway

Let’s take a gander at the key hedge fund action surrounding American Airlines Group Inc (NASDAQ:AAL).

What does the smart money think about American Airlines Group Inc (NASDAQ:AAL)?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AAL over the last 15 quarters. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

No of Hedge Funds with AAL Positions

Of the funds tracked by Insider Monkey, Berkshire Hathaway, managed by Warren Buffett, holds the largest position in American Airlines Group Inc (NASDAQ:AAL). Berkshire Hathaway has a $1.3879 billion position in the stock, comprising 0.7% of its 13F portfolio. Coming in second is Lansdowne Partners, led by Alex Snow, holding a $252.3 million position; the fund has 5.6% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions include Stephen C. Freidheim’s Cyrus Capital Partners, and John Tompkins’s Tyvor Capital.

Because American Airlines Group Inc (NASDAQ:AAL) has experienced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedgies that decided to sell off their entire stakes last quarter. Intriguingly, Andreas Halvorsen’s Viking Global sold off the biggest stake of the “upper crust” of funds watched by Insider Monkey, totaling an estimated $184.9 million in stock, and Stanley Druckenmiller’s Duquesne Capital was right behind this move, as the fund dumped about $16.9 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as American Airlines Group Inc (NASDAQ:AAL) but similarly valued. These stocks are Western Midstream Partners, LP (NYSE:WES), Xylem Inc (NYSE:XYL), CDW Corporation (NASDAQ:CDW), and Hologic, Inc. (NASDAQ:HOLX). This group of stocks’ market values match AAL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WES 8 136200 1
XYL 13 520900 -5
CDW 28 1148152 2
HOLX 23 755952 -5
Average 18 640301 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $640 million. That figure was $2033 million in AAL’s case. CDW Corporation (NASDAQ:CDW) is the most popular stock in this table. On the other hand Western Midstream Partners, LP (NYSE:WES) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks American Airlines Group Inc (NASDAQ:AAL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately AAL wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AAL were disappointed as the stock returned -11% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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