Hedge Funds Aren’t Crazy About Mesa Air Group, Inc. (MESA) Anymore

Is Mesa Air Group, Inc. (NASDAQ:MESA) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.

Is Mesa Air Group, Inc. (NASDAQ:MESA) the right pick for your portfolio? The best stock pickers are reducing their bets on the stock. The number of long hedge fund positions were cut by 3 in recent months. Our calculations also showed that MESA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). MESA was in 16 hedge funds’ portfolios at the end of the third quarter of 2019. There were 19 hedge funds in our database with MESA holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Altman Owl Creek

Jeffrey Altman of Owl Creek Asset Management

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to go over the new hedge fund action surrounding Mesa Air Group, Inc. (NASDAQ:MESA).

Hedge fund activity in Mesa Air Group, Inc. (NASDAQ:MESA)

At the end of the third quarter, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. By comparison, 13 hedge funds held shares or bullish call options in MESA a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

More specifically, MSDC Management was the largest shareholder of Mesa Air Group, Inc. (NASDAQ:MESA), with a stake worth $8.7 million reported as of the end of September. Trailing MSDC Management was Owl Creek Asset Management, which amassed a stake valued at $5.9 million. Whitebox Advisors, Royce & Associates, and Renaissance Technologies were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position MSDC Management allocated the biggest weight to Mesa Air Group, Inc. (NASDAQ:MESA), around 1.17% of its 13F portfolio. Owl Creek Asset Management is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to MESA.

Due to the fact that Mesa Air Group, Inc. (NASDAQ:MESA) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there were a few fund managers who sold off their positions entirely by the end of the third quarter. At the top of the heap, Richard Driehaus’s Driehaus Capital cut the biggest position of the 750 funds monitored by Insider Monkey, comprising about $6.7 million in stock. Doug Gordon, Jon Hilsabeck and Don Jabro’s fund, Shellback Capital, also sold off its stock, about $1.6 million worth. These moves are interesting, as total hedge fund interest was cut by 3 funds by the end of the third quarter.

Let’s check out hedge fund activity in other stocks similar to Mesa Air Group, Inc. (NASDAQ:MESA). We will take a look at LAIX Inc. (NYSE:LAIX), BCB Bancorp, Inc. (NASDAQ:BCBP), THL Credit, Inc. (NASDAQ:TCRD), and RTI Surgical Holdings, Inc. (NASDAQ:RTIX). This group of stocks’ market caps are similar to MESA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LAIX 3 3892 1
BCBP 3 6850 1
TCRD 6 25124 1
RTIX 14 24907 2
Average 6.5 15193 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 6.5 hedge funds with bullish positions and the average amount invested in these stocks was $15 million. That figure was $36 million in MESA’s case. RTI Surgical Holdings, Inc. (NASDAQ:RTIX) is the most popular stock in this table. On the other hand LAIX Inc. (NYSE:LAIX) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Mesa Air Group, Inc. (NASDAQ:MESA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Hedge funds were also right about betting on MESA, though not to the same extent, as the stock returned 7.7% during the fourth quarter (through the end of November) and outperformed the market as well.

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