Most airline stocks enjoyed a great run over the past several years, until 2015. The Amex Airline Index is down by double digits over the past 12 months and many technically-oriented investors believe the airline industry has entered a bear market. It is widely known that airlines are highly dependent upon global economic conditions, which explains their poor performance throughout 2015. However, these somewhat cyclical securities have embarked on a steady upward trend since early February of this year, which means that the much-scrutinized bear market may have run its course for now. With that in mind, let’s take a closer look at what the funds tracked by Insider Monkey think about United Continental Holdings Inc (NYSE:UAL) in this article.
United Continental Holdings Inc (NYSE:UAL) was in 73 hedge funds’ portfolios at the end of December. UAL shareholders have witnessed an increase in support from the world’s most elite money managers recently. There were 70 hedge funds in our database with UAL holdings at the end of the previous quarter. At the end of this article we will also compare UAL to other stocks including Electronic Arts Inc. (NASDAQ:EA), AmerisourceBergen Corp. (NYSE:ABC), and HP Inc. (NYSE:HPQ) to get a better sense of its popularity.
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At the beginning of January 2015, two of the largest shareholders of United Continental Holdings Inc (NYSE:UAL) formally declared activist positions in the company. Paul Reeder’s PAR Investment Partners L.P., which currently owns 14.13 million shares of the third-biggest U.S. air carrier by traffic, and Brad Gerstner’s Altimeter Capital Management, which owns 11.50 million shares of the company, formed an activist group earlier this year and intend to continue to engage in discussions with the company’s management, Board of Directors, and other parties regarding United Continental’s business, management, capital structure, capital allocation, and other issues. Just recently, United Continental Holdings Inc (NYSE:UAL) announced that Chief Executive Officer Oscar Munoz, who suffered a heart attack in October 2015 soon after being appointed as Chief Executive, will return to work full-time next week. Although the CEO has had very little time to make significant changes at the company, many investors believe that Mr. Munoz already managed to trigger some positive changes at the company as far as the relationship between its management and employees go, as well as in improving the company’s reputation. The shares of United Continental are 1% in the green year-to-date, thanks to the 23% gain registered in the past month.
With all of this in mind, let’s take a gander at the key action surrounding United Continental Holdings Inc (NYSE:UAL), as well as examine the company’s recent financial performance.
United Continental Holdings Inc (NYSE:UAL)’s consolidated passenger revenue totaled $32.79 billion in 2015, down by $977 million or 2.9% year-over-year due to a lower consolidated yield. Indeed, yields were mainly impacted by toughening competition in the domestic fare environment, the strengthening of the U.S dollar, and travel reductions from corporate customers in the energy sector. However, yields were positively affected by a 1.5% year-over-year increase in traffic. The company’s 2015 total aircraft fuel purchase cost, excluding fuel hedge impacts, decreased substantially in 2015, to $6.92 billion from $11.59 billion a year earlier. Nonetheless, United Continental’s fuel hedging activity materially impacted the company’s overall fuel expense incurred last year. Moreover, the company’s management anticipates that a one dollar change in the price of a barrel of crude oil would impact its annual fuel expense by roughly $94 million in 2016. It should also be noted that the carrier’s passenger revenue per available seat mile, or PRASM, decreased by 4.4% year-over-year. Meanwhile, the stock is priced at 6.37-times expected 2017 earnings, significantly below the forward P/E ratio of 16.55 for the S&P 500 benchmark.
How have hedgies been trading United Continental Holdings Inc (NYSE:UAL)?
At Q4’s end, a total of 73 of the hedge funds tracked by Insider Monkey were bullish on this stock, an increase of 4% from one quarter earlier. With hedgies’ sentiment swirling, there exists a select group of key hedge fund managers who were increasing their stakes considerably (or had already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Altimeter Capital Management has the biggest position in United Continental Holdings Inc (NYSE:UAL), worth close to $610.2 million, accounting for 33.4% of its total 13F portfolio. The second largest stake is held by PAR Capital Management, with a $368.1 million position; 6.8% of its 13F portfolio is allocated to the stock. Some other members of the smart money that hold long positions consist of Cliff Asness’ AQR Capital Management, Thomas E. Claugus’ GMT Capital, and Donald Chiboucis’ Columbus Circle Investors.
As one would reasonably expect, key hedge funds have jumped into United Continental Holdings Inc (NYSE:UAL) headfirst. Marianas Fund Management, managed by Will Snellings, assembled the most valuable position in United Continental Holdings Inc (NYSE:UAL). Marianas Fund Management had $74.3 million invested in the company at the end of the quarter. Mike Masters’ Masters Capital Management also initiated a $57.3 million position during the quarter. The other funds with new positions in the stock are James Dinan’s York Capital Management, Rob Citrone’s Discovery Capital Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s now head to the final page of this article, where we discuss the hedge fund activity in other companies with market capitalizations close to United Continental’s.
Let’s go over hedge fund activity in other stocks similar to United Continental Holdings Inc (NYSE:UAL). We will take a look at Electronic Arts Inc. (NASDAQ:EA), AmerisourceBergen Corp. (NYSE:ABC), HP Inc. (NYSE:HPQ), and Sirius XM Radio Inc (NASDAQ:SIRI). This group of stocks’ market values are closest to UAL’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EA | 57 | 2263518 | 6 |
| ABC | 37 | 1265605 | -1 |
| HPQ | 40 | 874393 | -19 |
| SIRI | 32 | 1318944 | -3 |
As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1.43 billion. That figure was $3.54 billion in UAL’s case. Electronic Arts Inc. (NASDAQ:EA) is the most popular stock in this table. On the other hand Sirius XM Radio Inc (NASDAQ:SIRI) is the least popular one with only 32 bullish hedge fund positions. Compared to these stocks United Continental Holdings Inc (NYSE:UAL) is more popular among hedge funds nd has far more money invested in it. Considering that hedge funds are fond of this stock in relation to its market cap peers and that sentiment was on the upswing heading into this year, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None
