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In this article we will check out the progression of hedge fund sentiment towards Hawaiian Holdings, Inc. (NASDAQ:HA) 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.
Hawaiian Holdings, Inc. (NASDAQ:HA) has seen an increase in hedge fund sentiment recently. HA was in 19 hedge funds' portfolios at the end of the first quarter of 2020. There were 15 hedge funds in our database with HA holdings at the end of the previous quarter. Our calculations also showed that HA 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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Martin Whitman of Third Avenue Management[/caption]
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. 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. Now we're going to take a gander at the key hedge fund action regarding Hawaiian Holdings, Inc. (NASDAQ:HA).
What have hedge funds been doing with Hawaiian Holdings, Inc. (NASDAQ:HA)?
At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of 27% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in HA over the last 18 quarters. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were upping their holdings significantly (or already accumulated large positions).
More specifically, Third Avenue Management was the largest shareholder of Hawaiian Holdings, Inc. (NASDAQ:HA), with a stake worth $12.7 million reported as of the end of September. Trailing Third Avenue Management was Alden Global Capital, which amassed a stake valued at $6.6 million. Sonic Capital, Arrowstreet Capital, and Oasis 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 Hawaiian Holdings, Inc. (NASDAQ:HA), around 4.52% of its 13F portfolio. Oasis Management is also relatively very bullish on the stock, setting aside 3.43 percent of its 13F equity portfolio to HA.
Now, key money managers were breaking ground themselves. Alden Global Capital, managed by Randall Smith, initiated the largest position in Hawaiian Holdings, Inc. (NASDAQ:HA). Alden Global Capital had $6.6 million invested in the company at the end of the quarter. Lawrence Kam's Sonic Capital also made a $5.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Seth Fischer's Oasis Management, Thomas E. Claugus's GMT Capital, and Benjamin A. Smith's Laurion Capital Management.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Hawaiian Holdings, Inc. (NASDAQ:HA) but similarly valued. We will take a look at Univest Financial Corporation (NASDAQ:UVSP), iHeartMedia, Inc. (NASDAQ:IHRT), SP Plus Corp (NASDAQ:SP), and Camden National Corporation (NASDAQ:CAC). All of these stocks' market caps are similar to HA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UVSP,11,55114,-2 IHRT,28,106885,-3 SP,11,65053,-2 CAC,10,43580,-3 Average,15,67658,-2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15 hedge funds with bullish positions and the average amount invested in these stocks was $68 million. That figure was $46 million in HA's case. iHeartMedia, Inc. (NASDAQ:IHRT) is the most popular stock in this table. On the other hand Camden National Corporation (NASDAQ:CAC) is the least popular one with only 10 bullish hedge fund positions. Hawaiian Holdings, Inc. (NASDAQ:HA) is not the most popular stock in this group but hedge fund interest is still above average. 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 13.4% in 2020 through June 22nd but still beat the market by 15.9 percentage points. Hedge funds were also right about betting on HA as the stock returned 39.3% in Q2 (through June 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.