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Were Hedge Funds Right About United Airlines Holdings Inc (UAL)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 835 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about United Airlines Holdings Inc (NYSE:UAL) in this article.

United Airlines Holdings Inc (NYSE:UAL) has seen an increase in support from the world’s most elite money managers of late. UAL was in 62 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 52 hedge funds in our database with UAL holdings at the end of the previous quarter. Our calculations also showed that UAL 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).

According to most traders, hedge funds are seen as unimportant, outdated investment vehicles of the past. While there are more than 8000 funds in operation at present, Our researchers choose to focus on the masters of this group, about 850 funds. Most estimates calculate that this group of people manage the lion’s share of the hedge fund industry’s total asset base, and by observing their inimitable investments, Insider Monkey has unearthed several investment strategies that have historically surpassed Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

Brad Gerstner Altimeter Capital

Brad Gerstner of Altimeter Capital

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). 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 we’re going to take a look at the new hedge fund action encompassing United Airlines Holdings Inc (NYSE:UAL).

What have hedge funds been doing with United Airlines Holdings Inc (NASDAQ:UAL)?

At the end of the fourth quarter, a total of 62 of the hedge funds tracked by Insider Monkey were long this stock, a change of 19% from the third quarter of 2019. By comparison, 49 hedge funds held shares or bullish call options in UAL a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Berkshire Hathaway held the most valuable stake in United Airlines Holdings Inc (NASDAQ:UAL), which was worth $1932.6 million at the end of the third quarter. On the second spot was PAR Capital Management which amassed $1241.8 million worth of shares. Altimeter Capital Management, AQR Capital Management, and Lansdowne Partners 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 PAR Capital Management allocated the biggest weight to United Airlines Holdings Inc (NASDAQ:UAL), around 24.16% of its 13F portfolio. Altimeter Capital Management is also relatively very bullish on the stock, setting aside 23.25 percent of its 13F equity portfolio to UAL.

As aggregate interest increased, key money managers have been driving this bullishness. Crake Asset Management, managed by Martin Taylor, created the most outsized position in United Airlines Holdings Inc (NASDAQ:UAL). Crake Asset Management had $59.8 million invested in the company at the end of the quarter. Jack Woodruff’s Candlestick Capital Management also made a $31.7 million investment in the stock during the quarter. The following funds were also among the new UAL investors: Dmitry Balyasny’s Balyasny Asset Management, Brandon Haley’s Holocene Advisors, and Gregg Moskowitz’s Interval Partners.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as United Airlines Holdings Inc (NASDAQ:UAL) but similarly valued. These stocks are ResMed Inc. (NYSE:RMD), Dollar Tree, Inc. (NASDAQ:DLTR), American Water Works Company, Inc. (NYSE:AWK), and Fresenius Medical Care AG & Co. (NYSE:FMS). This group of stocks’ market values resemble UAL’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RMD 21 172399 -2
DLTR 51 1620166 -1
AWK 29 625913 -11
FMS 11 13249 6
Average 28 607932 -2

View table here if you experience formatting issues.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $608 million. That figure was $6948 million in UAL’s case. Dollar Tree, Inc. (NASDAQ:DLTR) is the most popular stock in this table. On the other hand Fresenius Medical Care AG & Co. (NYSE:FMS) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks United Airlines Holdings Inc (NASDAQ:UAL) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately UAL wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on UAL were disappointed as the stock returned -68.5% during the three months of 2020 (through April 20th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
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.

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