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Here is Hedge Funds’ 29th Most Popular Stock Pick

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find write-ups about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves and analyze what the smart money thinks of Delta Air Lines, Inc. (NYSE:DAL) based on that data.

Delta Air Lines, Inc. (NYSE:DAL) investors should pay attention to an increase in support from the world’s most elite money managers recently. Our calculations also showed that DAL ranked 29th among the 30 most popular stocks among hedge funds.

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 flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Dmitry Balyasny

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s analyze the fresh hedge fund action surrounding Delta Air Lines, Inc. (NYSE:DAL).

How are hedge funds trading Delta Air Lines, Inc. (NYSE:DAL)?

Heading into the third quarter of 2019, a total of 70 of the hedge funds tracked by Insider Monkey were long this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards DAL over the last 16 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

DAL_oct2019

More specifically, Berkshire Hathaway was the largest shareholder of Delta Air Lines, Inc. (NYSE:DAL), with a stake worth $4024.2 million reported as of the end of March. Trailing Berkshire Hathaway was Lansdowne Partners, which amassed a stake valued at $1019.8 million. PAR Capital Management, Two Sigma Advisors, and Millennium Management were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, key hedge funds have jumped into Delta Air Lines, Inc. (NYSE:DAL) headfirst. Miller Value Partners, managed by Bill Miller, assembled the most valuable position in Delta Air Lines, Inc. (NYSE:DAL). Miller Value Partners had $73.4 million invested in the company at the end of the quarter. Ross Margolies’s Stelliam Investment Management also initiated a $33.2 million position during the quarter. The other funds with brand new DAL positions are Mike Masters’s Masters Capital Management, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Dmitry Balyasny’s Balyasny Asset Management.

Let’s go over hedge fund activity in other stocks similar to Delta Air Lines, Inc. (NYSE:DAL). We will take a look at Constellation Brands, Inc. (NYSE:STZ), Moody’s Corporation (NYSE:MCO), Sempra Energy (NYSE:SRE), and Dell Technologies Inc. (NYSE:DELL). This group of stocks’ market valuations are closest to DAL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
STZ 38 1438593 0
MCO 39 7178921 5
SRE 25 1323401 -6
DELL 40 1937951 3
Average 35.5 2969717 0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.5 hedge funds with bullish positions and the average amount invested in these stocks was $2970 million. That figure was $7271 million in DAL’s case. Dell Technologies Inc. (NYSE:DELL) is the most popular stock in this table. On the other hand Sempra Energy (NYSE:SRE) is the least popular one with only 25 bullish hedge fund positions. Compared to these stocks Delta Air Lines, Inc. (NYSE:DAL) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on DAL, though not to the same extent, as the stock returned 2.2% during the third quarter and outperformed the market as well.

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

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