Is UAL Stock A Buy or Sell?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about United Airlines Holdings Inc (NASDAQ:UAL).

Is UAL stock a buy or sell? United Airlines Holdings Inc (NASDAQ:UAL) investors should pay attention to an increase in support from the world’s most elite money managers in recent months. United Airlines Holdings Inc (NASDAQ:UAL) was in 52 hedge funds’ portfolios at the end of the fourth quarter of 2020. 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 Q4 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

At Insider Monkey we leave no stone unturned when looking for 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 hydrogen fuel cell 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 (or at the end of this article). Keeping this in mind let’s take a peek at the key hedge fund action surrounding United Airlines Holdings Inc (NASDAQ:UAL).

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

At Q4’s end, a total of 52 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 30% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards UAL over the last 22 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, PAR Capital Management held the most valuable stake in United Airlines Holdings Inc (NASDAQ:UAL), which was worth $305.1 million at the end of the fourth quarter. On the second spot was Altimeter Capital Management which amassed $207.7 million worth of shares. Two Sigma Advisors, Millennium Management, and Aristeia Capital 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 8.9% of its 13F portfolio. Sonic Capital is also relatively very bullish on the stock, dishing out 4.01 percent of its 13F equity portfolio to UAL.

As industrywide interest jumped, key hedge funds have been driving this bullishness. Jericho Capital Asset Management, managed by Josh Resnick, created the most outsized position in United Airlines Holdings Inc (NASDAQ:UAL). Jericho Capital Asset Management had $48.4 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $31.5 million position during the quarter. The following funds were also among the new UAL investors: Robert Bishop’s Impala Asset Management, Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, and Michael Gelband’s ExodusPoint Capital.

Let’s now review 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 Franklin Resources, Inc. (NYSE:BEN), FactSet Research Systems Inc. (NYSE:FDS), China Southern Airlines Co Ltd (NYSE:ZNH), Molina Healthcare, Inc. (NYSE:MOH), Evergy, Inc. (NYSE:EVRG), Nuance Communications Inc. (NASDAQ:NUAN), and Enel Americas S.A. (NYSE:ENIA). This group of stocks’ market caps are similar to UAL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BEN 33 268664 0
FDS 30 311111 1
ZNH 3 12698 0
MOH 27 1384810 -8
EVRG 33 1403512 -4
NUAN 60 4678042 15
ENIA 9 91500 -2
Average 27.9 1164334 0.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $1164 million. That figure was $1096 million in UAL’s case. Nuance Communications Inc. (NASDAQ:NUAN) is the most popular stock in this table. On the other hand China Southern Airlines Co Ltd (NYSE:ZNH) is the least popular one with only 3 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 74.4. 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. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 5.3% in 2021 through March 19th and still beat the market by 0.8 percentage points. Hedge funds were also right about betting on UAL as the stock returned 40.5% since the end of Q4 (through 3/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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