Before we spend days researching a stock idea we’d like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 13.5% in the fourth quarter. Seven out of 11 industry groups in the S&P 500 Index were down more than 20% from their 52-week highs at the trough of the stock market crash. The average return of a randomly picked stock in the index was even worse. This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 15 most popular S&P 500 stocks among hedge funds not only recouped their Q4 losses but also outperformed the index by more than 3 percentage points. In this article, we will take a look at what hedge funds think about American Airlines Group Inc (NASDAQ:AAL).
Is American Airlines Group Inc (NASDAQ:AAL) a buy here? Money managers are turning bullish. The number of bullish hedge fund bets increased by 6 in recent months. Our calculations also showed that AAL isn’t among the 30 most popular stocks among hedge funds.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the fresh hedge fund action surrounding American Airlines Group Inc (NASDAQ:AAL).
How are hedge funds trading American Airlines Group Inc (NASDAQ:AAL)?
At Q4’s end, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 15% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AAL over the last 14 quarters. With the smart money’s sentiment swirling, there exists a select group of noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in American Airlines Group Inc (NASDAQ:AAL) was held by Berkshire Hathaway, which reported holding $1403.2 million worth of stock at the end of September. It was followed by Lansdowne Partners with a $260.7 million position. Other investors bullish on the company included Viking Global, Citadel Investment Group, and Masters Capital Management.
As aggregate interest increased, key hedge funds have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, assembled the biggest position in American Airlines Group Inc (NASDAQ:AAL). Viking Global had $184.9 million invested in the company at the end of the quarter. Robert Polak’s Anchor Bolt Capital also made a $57.9 million investment in the stock during the quarter. The other funds with brand new AAL positions are Stanley Druckenmiller’s Duquesne Capital, John Tompkins’s Tyvor Capital, and Benjamin A. Smith’s Laurion Capital Management.
Let’s also examine hedge fund activity in other stocks similar to American Airlines Group Inc (NASDAQ:AAL). These stocks are Ctrip.com International, Ltd. (NASDAQ:CTRP), ABIOMED, Inc. (NASDAQ:ABMD), Plains All American Pipeline, L.P. (NYSE:PAA), and Ameriprise Financial, Inc. (NYSE:AMP). All of these stocks’ market caps match AAL’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $669 million. That figure was $2297 million in AAL’s case. Ameriprise Financial, Inc. (NYSE:AMP) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) 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. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately AAL wasn’t in this group. Hedge funds that bet on AAL were disappointed as the stock lost 1.9% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.