Hedge Funds Continue Selling Spirit Airlines Incorporated (SAVE)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded Spirit Airlines Incorporated (NYSE:SAVE) and determine whether the smart money was really smart about this stock.

Is Spirit Airlines Incorporated (NYSE:SAVE) undervalued? The smart money was becoming less hopeful. The number of long hedge fund positions shrunk by 5 in recent months. Spirit Airlines Incorporated (NYSE:SAVE) was in 23 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 39. Our calculations also showed that SAVE isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: 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 a select group of hedge fund holdings outperformed the S&P 500 ETFs by 56 percentage points since March 2017 (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 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this lithium company which could also benefit from the electric car adoption. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to review the new hedge fund action surrounding Spirit Airlines Incorporated (NYSE:SAVE).

What have hedge funds been doing with Spirit Airlines Incorporated (NYSE:SAVE)?

At second quarter’s end, a total of 23 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -18% from the previous quarter. On the other hand, there were a total of 31 hedge funds with a bullish position in SAVE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest call position in Spirit Airlines Incorporated (NYSE:SAVE), worth close to $20.4 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is PAR Capital Management, managed by Paul Reeder and Edward Shapiro, which holds a $17.8 million position; the fund has 0.7% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that hold long positions include Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners, Ken Griffin’s Citadel Investment Group and Dmitry Balyasny’s Balyasny Asset Management. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Spirit Airlines Incorporated (NYSE:SAVE), around 3.87% of its 13F portfolio. Quaker Capital Investments is also relatively very bullish on the stock, setting aside 3.77 percent of its 13F equity portfolio to SAVE.

Because Spirit Airlines Incorporated (NYSE:SAVE) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of fund managers who were dropping their entire stakes last quarter. It’s worth mentioning that Quincy Lee’s Ancient Art (Teton Capital) said goodbye to the largest position of all the hedgies monitored by Insider Monkey, comprising an estimated $11.9 million in stock. Steve Cohen’s fund, Point72 Asset Management, also dropped its stock, about $10.6 million worth. These transactions are interesting, as aggregate hedge fund interest was cut by 5 funds last quarter.

Let’s go over hedge fund activity in other stocks similar to Spirit Airlines Incorporated (NYSE:SAVE). We will take a look at MakeMyTrip Limited (NASDAQ:MMYT), United Community Banks Inc (NASDAQ:UCBI), Ambarella Inc (NASDAQ:AMBA), EverQuote, Inc. (NASDAQ:EVER), 360 DigiTech, Inc. (NASDAQ:QFIN), Noah Holdings Limited (NYSE:NOAH), and Otter Tail Corporation (NASDAQ:OTTR). This group of stocks’ market valuations resemble SAVE’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MMYT 10 28493 1
UCBI 17 25165 6
AMBA 27 171060 6
EVER 23 271845 0
QFIN 12 64598 9
NOAH 18 335783 4
OTTR 12 57260 0
Average 17 136315 3.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $99 million in SAVE’s case. Ambarella Inc (NASDAQ:AMBA) is the most popular stock in this table. On the other hand MakeMyTrip Limited (NASDAQ:MMYT) is the least popular one with only 10 bullish hedge fund positions. Spirit Airlines Incorporated (NYSE:SAVE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAVE is 55.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 24.8% in 2020 through the end of September and beat the market by 19.3 percentage points. Unfortunately SAVE wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on SAVE were disappointed as the stock returned -9.6% in Q3 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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