Hedge Funds Never Been Less Bullish On United Airlines Holdings Inc (UAL)

How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding United Airlines Holdings Inc (NASDAQ:UAL).

United Airlines Holdings Inc (NASDAQ:UAL) investors should pay attention to a decrease in enthusiasm from smart money lately. United Airlines Holdings Inc (NASDAQ:UAL) was in 38 hedge funds’ portfolios at the end of March. The all time high for this statistic is 73. Our calculations also showed that UAL isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a 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, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind let’s go over the new hedge fund action surrounding United Airlines Holdings Inc (NASDAQ:UAL).

Do Hedge Funds Think UAL Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 38 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -27% from the fourth quarter of 2020. On the other hand, there were a total of 41 hedge funds with a bullish position in UAL a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

Among these funds, PAR Capital Management held the most valuable stake in United Airlines Holdings Inc (NASDAQ:UAL), which was worth $287.7 million at the end of the fourth quarter. On the second spot was Citadel Investment Group which amassed $243.3 million worth of shares. Altimeter Capital Management, Masters Capital Management, and Citadel Investment Group 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 PAR Capital Management allocated the biggest weight to United Airlines Holdings Inc (NASDAQ:UAL), around 6.67% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, earmarking 4.56 percent of its 13F equity portfolio to UAL.

Due to the fact that United Airlines Holdings Inc (NASDAQ:UAL) has faced a decline in interest from the entirety of the hedge funds we track, it’s safe to say that there exists a select few funds that elected to cut their entire stakes by the end of the first quarter. Intriguingly, Josh Resnick’s Jericho Capital Asset Management said goodbye to the biggest stake of all the hedgies watched by Insider Monkey, valued at an estimated $48.4 million in stock. Renaissance Technologies, also dumped its stock, about $31.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 14 funds by the end of the first quarter.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as United Airlines Holdings Inc (NASDAQ:UAL) but similarly valued. We will take a look at Cheniere Energy, Inc. (NYSE:LNG), Amcor plc (NYSE:AMCR), Caesars Entertainment Inc. (NASDAQ:CZR), Affirm Holdings, Inc. (NASDAQ:AFRM), Expeditors International of Washington, Inc. (NASDAQ:EXPD), Rogers Communications Inc. (NYSE:RCI), and Invitation Homes Inc. (NYSE:INVH). This group of stocks’ market valuations are similar to UAL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LNG 40 2549760 2
AMCR 17 226541 -2
CZR 76 1520267 5
AFRM 32 582516 32
EXPD 21 440396 -4
RCI 18 289168 3
INVH 28 1174443 1
Average 33.1 969013 5.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.1 hedge funds with bullish positions and the average amount invested in these stocks was $969 million. That figure was $1024 million in UAL’s case. Caesars Entertainment Inc. (NASDAQ:CZR) is the most popular stock in this table. On the other hand Amcor plc (NYSE:AMCR) is the least popular one with only 17 bullish hedge fund positions. United Airlines Holdings Inc (NASDAQ:UAL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for UAL is 24.4. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 19.3% in 2021 through June 25th and beat the market again by 4.8 percentage points. Unfortunately UAL wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on UAL were disappointed as the stock returned -6.4% since the end of March (through 6/25) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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