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Were Hedge Funds Right About JetBlue Airways Corporation (JBLU)?

During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of JetBlue Airways Corporation (NASDAQ:JBLU) and see how the stock is affected by the recent hedge fund activity.

JetBlue Airways Corporation (NASDAQ:JBLU) shareholders have witnessed an increase in support from the world’s most elite money managers recently. Our calculations also showed that JBLU isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

SAC CAPITAL ADVISORS

Let’s take a peek at the latest hedge fund action regarding JetBlue Airways Corporation (NASDAQ:JBLU).

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

At the end of the fourth quarter, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 3% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards JBLU over the last 14 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.

JBLU_apr2019

More specifically, AQR Capital Management was the largest shareholder of JetBlue Airways Corporation (NASDAQ:JBLU), with a stake worth $163.1 million reported as of the end of September. Trailing AQR Capital Management was PAR Capital Management, which amassed a stake valued at $139.3 million. Renaissance Technologies, NWI Management, and GLG Partners were also very fond of the stock, giving the stock large weights in their portfolios.

As aggregate interest increased, key hedge funds were breaking ground themselves. Point72 Asset Management, managed by Steve Cohen, created the largest position in JetBlue Airways Corporation (NASDAQ:JBLU). Point72 Asset Management had $24.8 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $16.4 million position during the quarter. The other funds with new positions in the stock are Sara Nainzadeh’s Centenus Global Management, Matthew Hulsizer’s PEAK6 Capital Management, and Michael Kharitonov and Jon David McAuliffe’s Voleon Capital.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as JetBlue Airways Corporation (NASDAQ:JBLU) but similarly valued. We will take a look at CAE, Inc. (NYSE:CAE), Virtu Financial Inc (NASDAQ:VIRT), Elbit Systems Ltd. (NASDAQ:ESLT), and Lancaster Colony Corporation (NASDAQ:LANC). This group of stocks’ market values resemble JBLU’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CAE 9 84941 -1
VIRT 17 114979 3
ESLT 3 11299 1
LANC 12 257834 -4
Average 10.25 117263 -0.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $117 million. That figure was $624 million in JBLU’s case. Virtu Financial Inc (NASDAQ:VIRT) is the most popular stock in this table. On the other hand Elbit Systems Ltd. (NASDAQ:ESLT) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks JetBlue Airways Corporation (NASDAQ:JBLU) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately JBLU wasn’t nearly as popular as these 15 stock and hedge funds that were betting on JBLU were disappointed as the stock returned 4.8% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.

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

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