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Hedge Funds Are Buying JetBlue Airways Corporation (JBLU)

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Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards JetBlue Airways Corporation (NASDAQ:JBLU).

Is JetBlue Airways Corporation (NASDAQ:JBLU) a bargain? The best stock pickers were in a bullish mood. The number of long hedge fund bets advanced by 1 lately. JetBlue Airways Corporation (NASDAQ:JBLU) was in 30 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 42. Our calculations also showed that JBLU isn't among the 30 most popular stocks among hedge funds (click for Q2 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 79 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.

Billionaire Ken Griffin's Top 10 Stocks Holdings
Billionaire Ken Griffin's Top 10 Stocks Holdings

Ken Griffin of Citadel Investment Group

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. With all of this in mind let's take a look at the new hedge fund action encompassing JetBlue Airways Corporation (NASDAQ:JBLU).

Do Hedge Funds Think JBLU Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 30 of the hedge funds tracked by Insider Monkey were bullish on 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 24 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.

The largest stake in JetBlue Airways Corporation (NASDAQ:JBLU) was held by Citadel Investment Group, which reported holding $57.3 million worth of stock at the end of June. It was followed by Millennium Management with a $48.4 million position. Other investors bullish on the company included AQR Capital Management, Candlestick Capital Management, and PAR Capital Management. In terms of the portfolio weights assigned to each position Potrero Capital Research allocated the biggest weight to JetBlue Airways Corporation (NASDAQ:JBLU), around 2% of its 13F portfolio. PAR Capital Management is also relatively very bullish on the stock, setting aside 0.82 percent of its 13F equity portfolio to JBLU.

As one would reasonably expect, key money managers were leading the bulls' herd. Renaissance Technologies, created the biggest position in JetBlue Airways Corporation (NASDAQ:JBLU). Renaissance Technologies had $28.9 million invested in the company at the end of the quarter. Jack Woodruff's Candlestick Capital Management also made a $10.1 million investment in the stock during the quarter. The other funds with brand new JBLU positions are Paul Marshall and Ian Wace's Marshall Wace LLP, Steve Zheng's Deepcurrents Investment Group, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's go over hedge fund activity in other stocks similar to JetBlue Airways Corporation (NASDAQ:JBLU). We will take a look at Inovalon Holdings Inc (NASDAQ:INOV), Ashland Global Holdings Inc.. (NYSE:ASH), Enstar Group Ltd. (NASDAQ:ESGR), QTS Realty Trust Inc (NYSE:QTS), Gates Industrial Corporation plc (NYSE:GTES), Glacier Bancorp, Inc. (NASDAQ:GBCI), and Inspire Medical Systems, Inc. (NYSE:INSP). This group of stocks' market caps are similar to JBLU's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position INOV,20,145599,3 ASH,28,933462,-8 ESGR,11,495727,0 QTS,39,1285562,17 GTES,19,89195,1 GBCI,11,51205,-5 INSP,32,544165,4 Average,22.9,506416,1.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $506 million. That figure was $402 million in JBLU's case. QTS Realty Trust Inc (NYSE:QTS) is the most popular stock in this table. On the other hand Enstar Group Ltd. (NASDAQ:ESGR) is the least popular one with only 11 bullish hedge fund positions. JetBlue Airways Corporation (NASDAQ:JBLU) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for JBLU is 61.4. 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 positive signal but 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 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately JBLU wasn't nearly as popular as these 5 stocks and hedge funds that were betting on JBLU were disappointed as the stock returned -8.9% since the end of June (through 10/15) 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 many of these stocks already outperformed the market since 2019.

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