In this article we will check out the progression of hedge fund sentiment towards Spirit Airlines Incorporated (NYSE:SAVE) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Spirit Airlines Incorporated (NYSE:SAVE) going to take off soon? The best stock pickers are getting less bullish. The number of long hedge fund bets retreated by 9 recently. Our calculations also showed that SAVE isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). SAVE was in 28 hedge funds' portfolios at the end of March. There were 37 hedge funds in our database with SAVE positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the 21st century investor’s toolkit there are numerous indicators market participants use to evaluate stocks. A couple of the most useful indicators are hedge fund and insider trading activity. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can outpace the broader indices by a significant margin (see the details here).
[caption id="attachment_695350" align="aligncenter" width="397"] Anna Nikolayevsky of Axel Capital[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we are checking out investment opportunities like these. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's go over the key hedge fund action encompassing Spirit Airlines Incorporated (NYSE:SAVE).
How have hedgies been trading Spirit Airlines Incorporated (NYSE:SAVE)?
Heading into the second quarter of 2020, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -24% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards SAVE over the last 18 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, PAR Capital Management held the most valuable stake in Spirit Airlines Incorporated (NYSE:SAVE), which was worth $21.1 million at the end of the third quarter. On the second spot was Ancient Art (Teton Capital) which amassed $11.9 million worth of shares. Point72 Asset Management, Sonic Capital, and NWI 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 Sonic Capital allocated the biggest weight to Spirit Airlines Incorporated (NYSE:SAVE), around 6.7% of its 13F portfolio. Mountain Lake Investment Management is also relatively very bullish on the stock, setting aside 4.07 percent of its 13F equity portfolio to SAVE.
Due to the fact that Spirit Airlines Incorporated (NYSE:SAVE) has witnessed declining sentiment from the smart money, it's easy to see that there lies a certain "tier" of funds who were dropping their entire stakes last quarter. Interestingly, D. E. Shaw's D E Shaw cut the largest investment of the 750 funds followed by Insider Monkey, worth about $10.8 million in stock, and Brad Gerstner's Altimeter Capital Management was right behind this move, as the fund dropped about $9.1 million worth. These bearish behaviors are interesting, as total hedge fund interest dropped by 9 funds last quarter.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Spirit Airlines Incorporated (NYSE:SAVE) but similarly valued. We will take a look at Black Diamond Therapeutics, Inc. (NASDAQ:BDTX), U.S. Physical Therapy, Inc. (NYSE:USPH), Hertz Global Holdings, Inc. (NYSE:HTZ), and Suburban Propane Partners LP (NYSE:SPH). This group of stocks' market valuations are similar to SAVE's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BDTX,13,162606,13 USPH,12,33325,-4 HTZ,24,515179,-9 SPH,4,40581,-1 Average,13.25,187923,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $188 million. That figure was $86 million in SAVE's case. Hertz Global Holdings, Inc. (NYSE:HTZ) is the most popular stock in this table. On the other hand Suburban Propane Partners LP (NYSE:SPH) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Spirit Airlines Incorporated (NYSE:SAVE) 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 gained 8.3% in 2020 through the end of May and still beat the market by 13.2 percentage points. Unfortunately SAVE wasn't nearly as popular as these 10 stocks and hedge funds that were betting on SAVE were disappointed as the stock returned 0.5% during the second quarter (through the end of May) 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.
Disclosure: None. This article was originally published at Insider Monkey.