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How Did Alaska Air Group, Inc. (ALK) Compare Against Top Hedge Fund Stocks in 2019?

Debasis Saha

While the market driven by short-term sentiment influenced by the accomodative interest rate environment in the US, increasing oil prices and deteriorating expectations towards the resolution of the trade war with China, many smart money investors kept their cautious approach regarding the current bull run in the third quarter and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Alaska Air Group, Inc. (NYSE:ALK) and see how the stock performed in comparison to hedge funds' consensus picks.

Is Alaska Air Group, Inc. (NYSE:ALK) worth your attention right now? Hedge funds are betting on the stock. The number of long hedge fund positions inched up by 9 in recent months. Our calculations also showed that ALK isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

If you'd ask most investors, hedge funds are viewed as underperforming, outdated investment tools of yesteryear. While there are more than 8000 funds trading today, Our experts hone in on the elite of this group, around 750 funds. It is estimated that this group of investors watch over the majority of the smart money's total capital, and by keeping an eye on their top investments, Insider Monkey has unsheathed several investment strategies that have historically outpaced Mr. Market. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points per year since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .

[caption id="attachment_747408" align="alignnone" width="1613"] Paul Reeder of PAR Capital Management[/caption]

Paul Reeder PAR Capital Management

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to go over the latest hedge fund action surrounding Alaska Air Group, Inc. (NYSE:ALK).

How have hedgies been trading Alaska Air Group, Inc. (NYSE:ALK)?

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 41% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ALK over the last 17 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.

Is ALK A Good Stock To Buy?

Among these funds, PAR Capital Management held the most valuable stake in Alaska Air Group, Inc. (NYSE:ALK), which was worth $175.9 million at the end of the third quarter. On the second spot was Diamond Hill Capital which amassed $136.2 million worth of shares. Millennium Management, Greenhouse Funds, and Point72 Asset 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 Greenhouse Funds allocated the biggest weight to Alaska Air Group, Inc. (NYSE:ALK), around 4.19% of its 13F portfolio. Albar Capital is also relatively very bullish on the stock, earmarking 3.44 percent of its 13F equity portfolio to ALK.

As industrywide interest jumped, key hedge funds have jumped into Alaska Air Group, Inc. (NYSE:ALK) headfirst. Renaissance Technologies, established the most outsized position in Alaska Air Group, Inc. (NYSE:ALK). Renaissance Technologies had $10.8 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace also initiated a $8.5 million position during the quarter. The other funds with brand new ALK positions are Noam Gottesman's GLG Partners, Sara Nainzadeh's Centenus Global Management, and David E. Shaw's D E Shaw.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Alaska Air Group, Inc. (NYSE:ALK) but similarly valued. These stocks are Pilgrim's Pride Corporation (NASDAQ:PPC), ICON Public Limited Company (NASDAQ:ICLR), Euronet Worldwide, Inc. (NASDAQ:EEFT), and Invesco Ltd. (NYSE:IVZ). This group of stocks' market values are similar to ALK's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PPC,24,264319,5 ICLR,20,613069,1 EEFT,35,322755,2 IVZ,24,198236,4 Average,25.75,349595,3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $350 million. That figure was $486 million in ALK's case. Euronet Worldwide, Inc. (NASDAQ:EEFT) is the most popular stock in this table. On the other hand ICON Public Limited Company (NASDAQ:ICLR) is the least popular one with only 20 bullish hedge fund positions. Alaska Air Group, Inc. (NYSE:ALK) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Unfortunately ALK wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ALK were disappointed as the stock returned 16.4% in 2019 (through December 23rd) 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 many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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