In this article we will analyze whether Alaska Air Group, Inc. (NYSE:ALK) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.
Is Alaska Air Group, Inc. (NYSE:ALK) the right pick for your portfolio? Prominent investors were cutting their exposure. The number of long hedge fund bets were trimmed by 3 lately. Alaska Air Group, Inc. (NYSE:ALK) was in 32 hedge funds’ portfolios at the end of March. The all time high for this statistic is 42. Our calculations also showed that ALK isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 115 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind we’re going to analyze the new hedge fund action regarding Alaska Air Group, Inc. (NYSE:ALK).
Do Hedge Funds Think ALK Is A Good Stock To Buy Now?
At Q1’s end, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from one quarter earlier. By comparison, 27 hedge funds held shares or bullish call options in ALK 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.
Of the funds tracked by Insider Monkey, Paul Reeder and Edward Shapiro’s PAR Capital Management has the largest position in Alaska Air Group, Inc. (NYSE:ALK), worth close to $138.9 million, accounting for 3.2% of its total 13F portfolio. The second most bullish fund manager is Ken Griffin of Citadel Investment Group, with a $72.9 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers with similar optimism consist of Gabriel Plotkin’s Melvin Capital Management, Steve Cohen’s Point72 Asset Management and Matthew Stadelman’s Diamond Hill Capital. In terms of the portfolio weights assigned to each position 1060 Capital Management allocated the biggest weight to Alaska Air Group, Inc. (NYSE:ALK), around 6.48% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, designating 3.22 percent of its 13F equity portfolio to ALK.
Due to the fact that Alaska Air Group, Inc. (NYSE:ALK) has experienced a decline in interest from hedge fund managers, we can see that there were a few funds who were dropping their full holdings last quarter. At the top of the heap, Josh Donfeld and David Rogers’s Castle Hook Partners dropped the biggest investment of all the hedgies watched by Insider Monkey, comprising about $19.7 million in stock, and George Soros’s Soros Fund Management was right behind this move, as the fund said goodbye to about $9.1 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Alaska Air Group, Inc. (NYSE:ALK) but similarly valued. We will take a look at Assurant, Inc. (NYSE:AIZ), Reinsurance Group of America Inc (NYSE:RGA), UGI Corp (NYSE:UGI), Vistra Corp. (NYSE:VST), Guidewire Software Inc (NYSE:GWRE), Omega Healthcare Investors Inc (NYSE:OHI), and The New York Times Company (NYSE:NYT). This group of stocks’ market valuations are closest to ALK’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.1 hedge funds with bullish positions and the average amount invested in these stocks was $993 million. That figure was $588 million in ALK’s case. The New York Times Company (NYSE:NYT) is the most popular stock in this table. On the other hand UGI Corp (NYSE:UGI) is the least popular one with only 19 bullish hedge fund positions. Alaska Air Group, Inc. (NYSE:ALK) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ALK is 47.3. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 22.8% in 2021 through July 2nd and surpassed the market again by 6 percentage points. Unfortunately ALK wasn’t nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); ALK investors were disappointed as the stock returned -12.3% since the end of March (through 7/2) 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 in 2021.
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Disclosure: None. This article was originally published at Insider Monkey.