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Is United Continental Holdings Inc (UAL) Going to Burn These Hedge Funds?

Before we spend many hours researching a company, we’d like to analyze what hedge funds and billionaire investors think of the stock first. We would like to do so because the elite investors’ consensus returns have been exceptional. The top 30 S&P 500 stocks among hedge funds at the end of September 2014 yielded an average return of 9.5% during the last 12 months ending in October 30. Sixty three percent of these 30 stocks outperformed the market. Although the elite funds occasionally have their duds, such as Micron and Anadarko Petroleum, which fell 50% and 26%, respectively during the same time period, the hedge fund picks seem to work on average. In the following paragraphs, we find out what the billionaire investors and hedge funds think of United Continental Holdings Inc (NYSE:UAL).

United Continental Holdings Inc (NYSE:UAL) has seen a decrease in activity from the world’s largest hedge funds of late. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Brown-Forman Corporation (NYSE:BF), Incyte Corporation (NASDAQ:INCY), and Sirius XM Radio Inc (NASDAQ:SIRI) to gather more data points.

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According to most traders, hedge funds are seen as worthless, outdated investment tools of yesteryear. While there are greater than 8000 funds with their doors open today, Our researchers look at the leaders of this club, around 700 funds. These money managers oversee bulk of all hedge funds’ total asset base, and by shadowing their matchless stock picks, Insider Monkey has deciphered numerous investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points annually for a decade in their back tests.

Now, we’re going to go over the recent action encompassing United Continental Holdings Inc (NYSE:UAL).

How are hedge funds trading United Continental Holdings Inc (NYSE:UAL)?

At Q3’s end, a total of 70 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Altimeter Capital Management, managed by Brad Gerstner, holds the number one position in United Continental Holdings Inc (NYSE:UAL). Altimeter Capital Management has a $493.4 million position in the stock, comprising 31.6% of its 13F portfolio. Sitting at the No. 2 spot is GMT Capital, led by Thomas E. Claugus, holding a $371.3 million position; the fund has 9.4% of its 13F portfolio invested in the stock. The remaining members of the smart money that are bullish contain Paul Reeder and Edward Shapiro’s PAR Capital Management, Cliff Asness’s AQR Capital Management and Daniel S. Och’s OZ Management.

Since United Continental Holdings Inc (NYSE:UAL) has witnessed a declination in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few money managers that slashed their full holdings last quarter. It’s worth mentioning that James Dinan’s York Capital Management sold off the largest stake of the 700 funds watched by Insider Monkey, valued at an estimated $177.7 million in stock, and Doug Silverman and Alexander Klabin’s Senator Investment Group was right behind this move, as the fund cut about $92.8 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let’s check out hedge fund activity in other stocks similar to United Continental Holdings Inc (NYSE:UAL). These stocks are Brown-Forman Corporation (NYSE:BF), Incyte Corporation (NASDAQ:INCY), Sirius XM Radio Inc (NASDAQ:SIRI), and KKR & Co. L.P. (NYSE:KKR). This group of stocks’ market valuations are closest to UAL’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BF 23 621353 3
INCY 40 3233575 5
SIRI 35 1398167 3
KKR 30 581377 0

As you can see these stocks had an average of 32 hedge funds with bullish positions and the average amount invested in these stocks was $1459 million. That figure was $2974 million in UAL’s case. Incyte Corporation (NASDAQ:INCY) is the most popular stock in this table with a total of 40 funds disclosing long positions. On the other hand Brown-Forman Corporation (NYSE:BF) is the least popular one with only 23 bullish hedge fund positions. Compared to these stocks United Continental Holdings Inc (NYSE:UAL) 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.

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