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SkyWest, Inc. (SKYW): Hedge Funds In Wait-and-See Mode

Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 20 stocks among hedge funds beat the S&P 500 Index ETF by 4 percentage points so far this year. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at SkyWest, Inc. (NASDAQ:SKYW) from the perspective of those elite funds.

Hedge fund interest in SkyWest, Inc. (NASDAQ:SKYW) shares was flat at the end of last quarter. This is usually a negative indicator. 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 Cosan Limited (NYSE:CZZ), Liberty Latin America Ltd. (NASDAQ:LILA), and MorphoSys AG (NASDAQ:MOR) to gather more data points. Our calculations also showed that SkyWest isn’t among the 30 most popular stocks among hedge funds (see the video below)
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are seen as unimportant, outdated investment tools of years past. While there are greater than 8000 funds trading at the moment, We hone in on the crème de la crème of this club, around 750 funds. These money managers have their hands on the majority of the hedge fund industry’s total asset base, and by following their matchless stock picks, Insider Monkey has unearthed a few investment strategies that have historically outpaced the broader indices. Insider Monkey’s flagship hedge fund strategy outrun the S&P 500 index by around 5 percentage points a year since its inception in May 2014. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 25.7% since February 2017 (through September 30th) even though the market was up more than 33% during the same period. We just shared a list of 10 short targets in our latest quarterly update .

Paul Marshall Marshall Wace

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We’re going to take a look at the new hedge fund action encompassing SkyWest, Inc. (NASDAQ:SKYW).

Hedge fund activity in SkyWest, Inc. (NASDAQ:SKYW)

At the end of the second quarter, a total of 13 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SKYW over the last 16 quarters. With the smart money’s capital changing hands, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).

No of Hedge Funds with SKYW Positions

The largest stake in SkyWest, Inc. (NASDAQ:SKYW) was held by Renaissance Technologies, which reported holding $127.6 million worth of stock at the end of March. It was followed by PAR Capital Management with a $27.8 million position. Other investors bullish on the company included Marshall Wace LLP, Millennium Management, and Citadel Investment Group.

Due to the fact that SkyWest, Inc. (NASDAQ:SKYW) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there exists a select few fund managers that decided to sell off their entire stakes in the second quarter. It’s worth mentioning that Matthew Hulsizer’s PEAK6 Capital Management said goodbye to the largest stake of the “upper crust” of funds tracked by Insider Monkey, valued at an estimated $0.8 million in stock, and Benjamin A. Smith’s Laurion Capital Management was right behind this move, as the fund dumped about $0.4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as SkyWest, Inc. (NASDAQ:SKYW) but similarly valued. These stocks are Cosan Limited (NYSE:CZZ), Liberty Latin America Ltd. (NASDAQ:LILA), MorphoSys AG (NASDAQ:MOR), and Cleveland-Cliffs Inc (NYSE:CLF). This group of stocks’ market caps are closest to SKYW’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CZZ 15 174422 -1
LILA 11 144973 -3
MOR 6 37770 -1
CLF 28 539781 -7
Average 15 224237 -3

View table here if you experience formatting issues.

As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $197 million in SKYW’s case. Cleveland-Cliffs Inc (NYSE:CLF) is the most popular stock in this table. On the other hand MorphoSys AG (NASDAQ:MOR) is the least popular one with only 6 bullish hedge fund positions. SkyWest, Inc. (NASDAQ:SKYW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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. Unfortunately SKYW wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); SKYW investors were disappointed as the stock returned -5.2% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far in 2019.

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

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