Will the new coronavirus cause a recession in US in the next 6 months? On February 27th, we put the probability at 75% and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Spirit Airlines Incorporated (NASDAQ:SAVE).
Spirit Airlines Incorporated (NASDAQ:SAVE) investors should be aware of an increase in enthusiasm from smart money in recent months. Our calculations also showed that SAVE isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Kerr Neilson of Platinum Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s take a look at the fresh hedge fund action regarding Spirit Airlines Incorporated (NASDAQ:SAVE).
How have hedgies been trading Spirit Airlines Incorporated (NYSE:SAVE)?
At Q4’s end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 32% from the third quarter of 2019. On the other hand, there were a total of 30 hedge funds with a bullish position in SAVE a year ago. 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, Millennium Management held the most valuable stake in Spirit Airlines Incorporated (NYSE:SAVE), which was worth $40.3 million at the end of the third quarter. On the second spot was Point72 Asset Management which amassed $37.6 million worth of shares. Platinum Asset Management, Polar Capital, and NWI Management 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 Mountain Lake Investment Management allocated the biggest weight to Spirit Airlines Incorporated (NYSE:SAVE), around 9.59% of its 13F portfolio. Invenomic Capital Management is also relatively very bullish on the stock, earmarking 2.22 percent of its 13F equity portfolio to SAVE.
Consequently, key hedge funds have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, initiated the most valuable position in Spirit Airlines Incorporated (NYSE:SAVE). Point72 Asset Management had $37.6 million invested in the company at the end of the quarter. Kerr Neilson’s Platinum Asset Management also initiated a $33.4 million position during the quarter. The following funds were also among the new SAVE investors: Paul Reeder and Edward Shapiro’s PAR Capital Management, Gregg Moskowitz’s Interval Partners, and Ali Motamed’s Invenomic Capital Management.
Let’s also examine hedge fund activity in other stocks similar to Spirit Airlines Incorporated (NYSE:SAVE). We will take a look at Olin Corporation (NYSE:OLN), American Assets Trust, Inc (NYSE:AAT), Moog Inc (NYSE:MOG), and DouYu International Holdings Limited (NASDAQ:DOYU). This group of stocks’ market values resemble SAVE’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| OLN | 33 | 359098 | 5 |
| AAT | 15 | 42601 | 3 |
| MOG | 21 | 102586 | 0 |
| DOYU | 6 | 41645 | -4 |
| Average | 18.75 | 136483 | 1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 18.75 hedge funds with bullish positions and the average amount invested in these stocks was $136 million. That figure was $329 million in SAVE’s case. Olin Corporation (NYSE:OLN) is the most popular stock in this table. On the other hand DouYu International Holdings Limited (NASDAQ:DOYU) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Spirit Airlines Incorporated (NYSE:SAVE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th and still beat the market by 5.5 percentage points. Unfortunately SAVE wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on SAVE were disappointed as the stock returned -60.4% during the first two and a half months of 2020 (through March 25th) 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
