In this article we are going to use hedge fund sentiment as a tool and determine whether Spirit Airlines Incorporated (NYSE:SAVE) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Spirit Airlines Incorporated (NYSE:SAVE) an exceptional investment now? The best stock pickers were buying. The number of long hedge fund bets moved up by 1 recently. Spirit Airlines Incorporated (NYSE:SAVE) was in 24 hedge funds’ portfolios at the end of March. The all time high for this statistic is 39. Our calculations also showed that SAVE isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 23 hedge funds in our database with SAVE holdings at the end of December.
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 S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, Chuck Schumer recently stated that marijuana legalization will be a Senate priority. So, we are checking out this under the radar stock that will benefit from this. We go through lists like the 10 best battery 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. With all of this in mind we’re going to take a glance at the fresh hedge fund action regarding Spirit Airlines Incorporated (NYSE:SAVE).
Do Hedge Funds Think SAVE Is A Good Stock To Buy Now?
At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 4% from the fourth quarter of 2020. The graph below displays the number of hedge funds with bullish position in SAVE over the last 23 quarters. So, let’s find out 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 Spirit Airlines Incorporated (NYSE:SAVE), which was worth $55.4 million at the end of the fourth quarter. On the second spot was Two Sigma Advisors which amassed $39.4 million worth of shares. Citadel Investment Group, Driehaus Capital, and Citadel Investment Group 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 Sonic Capital allocated the biggest weight to Spirit Airlines Incorporated (NYSE:SAVE), around 6.66% of its 13F portfolio. Teewinot Capital Advisers is also relatively very bullish on the stock, designating 2.2 percent of its 13F equity portfolio to SAVE.
Consequently, key hedge funds have jumped into Spirit Airlines Incorporated (NYSE:SAVE) headfirst. Driehaus Capital, managed by Richard Driehaus, initiated the most outsized position in Spirit Airlines Incorporated (NYSE:SAVE). Driehaus Capital had $29.7 million invested in the company at the end of the quarter. John Osterweis’s Osterweis Capital Management also made a $10.6 million investment in the stock during the quarter. The other funds with new positions in the stock are Donald Sussman’s Paloma Partners, Dmitry Balyasny’s Balyasny Asset Management, and Charles Davidson and Joseph Jacobs’s Wexford Capital.
Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Spirit Airlines Incorporated (NYSE:SAVE) but similarly valued. We will take a look at Eastern Bankshares, Inc. (NASDAQ:EBC), SpringWorks Therapeutics, Inc. (NASDAQ:SWTX), WNS (Holdings) Limited (NYSE:WNS), Veracyte Inc (NASDAQ:VCYT), Yalla Group Limited (NYSE:YALA), Riot Blockchain, Inc (NASDAQ:RIOT), and Agios Pharmaceuticals Inc (NASDAQ:AGIO). This group of stocks’ market valuations resemble SAVE’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 17.1 hedge funds with bullish positions and the average amount invested in these stocks was $418 million. That figure was $251 million in SAVE’s case. SpringWorks Therapeutics, Inc. (NASDAQ:SWTX) is the most popular stock in this table. On the other hand Yalla Group Limited (NYSE:YALA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Spirit Airlines Incorporated (NYSE:SAVE) is more popular among hedge funds. Our overall hedge fund sentiment score for SAVE is 74.5. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and still beat the market by 7.7 percentage points. Unfortunately SAVE wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on SAVE were disappointed as the stock returned -28.6% since the end of the first quarter (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.