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JetBlue Airways Corporation (JBLU) Fell Out Of Favor With Hedge Funds

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards JetBlue Airways Corporation (NASDAQ:JBLU) and determine whether hedge funds skillfully traded this stock.

JetBlue Airways Corporation (NASDAQ:JBLU) was in 28 hedge funds’ portfolios at the end of June. The all time high for this statistics is 42. JBLU investors should be aware of a decrease in enthusiasm from smart money lately. There were 36 hedge funds in our database with JBLU positions at the end of the first quarter. Our calculations also showed that JBLU isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

COATUE MANAGEMENT

Philippe Laffont of Coatue Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Keeping this in mind we’re going to analyze the new hedge fund action surrounding JetBlue Airways Corporation (NASDAQ:JBLU).

What does smart money think about JetBlue Airways Corporation (NASDAQ:JBLU)?

At Q2’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards JBLU over the last 20 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is JBLU A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Doug Silverman and Alexander Klabin’s Senator Investment Group has the number one position in JetBlue Airways Corporation (NASDAQ:JBLU), worth close to $23.2 million, corresponding to 0.8% of its total 13F portfolio. The second most bullish fund manager is PAR Capital Management, managed by Paul Reeder and Edward Shapiro, which holds a $21.8 million position; the fund has 0.8% of its 13F portfolio invested in the stock. Remaining members of the smart money with similar optimism comprise Hari Hariharan’s NWI Management, Cliff Asness’s AQR Capital Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position NWI Management allocated the biggest weight to JetBlue Airways Corporation (NASDAQ:JBLU), around 1.02% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, setting aside 0.84 percent of its 13F equity portfolio to JBLU.

Since JetBlue Airways Corporation (NASDAQ:JBLU) has faced bearish sentiment from the smart money, logic holds that there was a specific group of fund managers who sold off their full holdings in the second quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dropped the biggest stake of the “upper crust” of funds watched by Insider Monkey, valued at about $18.1 million in stock. Quincy Lee’s fund, Ancient Art (Teton Capital), also said goodbye to its stock, about $6.5 million worth. These transactions are important to note, as total hedge fund interest fell by 8 funds in the second quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as JetBlue Airways Corporation (NASDAQ:JBLU) but similarly valued. These stocks are Safehold Inc. (NYSE:SAFE), Eagle Materials, Inc. (NYSE:EXP), Verint Systems Inc. (NASDAQ:VRNT), Lexington Realty Trust (NYSE:LXP), Karuna Therapeutics, Inc. (NASDAQ:KRTX), Fate Therapeutics Inc (NASDAQ:FATE), and Viavi Solutions Inc (NASDAQ:VIAV). All of these stocks’ market caps match JBLU’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
SAFE 7 7836 2
EXP 41 428808 7
VRNT 25 333301 8
LXP 10 43913 0
KRTX 16 177325 0
FATE 36 985557 12
VIAV 31 340923 0
Average 23.7 331095 4.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.7 hedge funds with bullish positions and the average amount invested in these stocks was $331 million. That figure was $132 million in JBLU’s case. Eagle Materials, Inc. (NYSE:EXP) is the most popular stock in this table. On the other hand Safehold Inc. (NYSE:SAFE) is the least popular one with only 7 bullish hedge fund positions. JetBlue Airways Corporation (NASDAQ:JBLU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JBLU is 47.9. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 21.3% in 2020 through September 25th and beat the market by 17.7 percentage points. Unfortunately JBLU wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on JBLU were disappointed as the stock returned 5.8% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.

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