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Here’s What Hedge Funds Think About Alaska Air Group, Inc. (ALK)

Abigail Fisher

Insider Monkey finished processing more than 738 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of March 31st, 2019. What do these smart investors think about Alaska Air Group, Inc. (NYSE:ALK)?

Alaska Air Group, Inc. (NYSE:ALK) was in 20 hedge funds' portfolios at the end of March. ALK shareholders have witnessed a decrease in activity from the world's largest hedge funds recently. There were 32 hedge funds in our database with ALK positions at the end of the previous quarter. Our calculations also showed that ALK isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_747408" align="aligncenter" width="473"] Paul Reeder of PAR Capital[/caption]

Paul Reeder PAR Capital Management

We're going to take a gander at the key hedge fund action surrounding Alaska Air Group, Inc. (NYSE:ALK).

What have hedge funds been doing with Alaska Air Group, Inc. (NYSE:ALK)?

Heading into the second quarter of 2019, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -38% from the fourth quarter of 2018. By comparison, 22 hedge funds held shares or bullish call options in ALK a year ago. With hedgies' capital changing hands, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

ALK_june2019

More specifically, PAR Capital Management was the largest shareholder of Alaska Air Group, Inc. (NYSE:ALK), with a stake worth $152.1 million reported as of the end of March. Trailing PAR Capital Management was Diamond Hill Capital, which amassed a stake valued at $126.7 million. Point72 Asset Management, Citadel Investment Group, and Greenhouse Funds were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Alaska Air Group, Inc. (NYSE:ALK) has experienced bearish sentiment from hedge fund managers, it's easy to see that there was a specific group of hedge funds who were dropping their positions entirely last quarter. It's worth mentioning that D. E. Shaw's D E Shaw said goodbye to the biggest stake of the "upper crust" of funds monitored by Insider Monkey, valued at an estimated $24.8 million in stock. Principal Global Investors's fund, Columbus Circle Investors, also sold off its stock, about $16.9 million worth. These bearish behaviors are important to note, as total hedge fund interest fell by 12 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Alaska Air Group, Inc. (NYSE:ALK). We will take a look at Capri Holdings Limited (NYSE:CPRI), Douglas Emmett, Inc. (NYSE:DEI), Nordstrom, Inc. (NYSE:JWN), and Nutanix, Inc. (NASDAQ:NTNX). This group of stocks' market caps are closest to ALK's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPRI,37,1222168,4 DEI,14,363321,2 JWN,26,283069,3 NTNX,36,456099,-1 Average,28.25,581164,2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.25 hedge funds with bullish positions and the average amount invested in these stocks was $581 million. That figure was $466 million in ALK's case. Capri Holdings Limited (NYSE:CPRI) is the most popular stock in this table. On the other hand Douglas Emmett, Inc. (NYSE:DEI) is the least popular one with only 14 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 calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on ALK as the stock returned 5.3% during the same time frame and outperformed the market by an even larger margin.

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

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