Is LATAM Airlines Group S.A. (NYSE:LTM) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably but historically their consensus stock picks outperformed the market after adjusting for known risk factors.
LATAM Airlines Group S.A. (NYSE:LTM) was in 8 hedge funds' portfolios at the end of December. LTM shareholders have witnessed an increase in hedge fund interest in recent months. There were 5 hedge funds in our database with LTM holdings at the end of the previous quarter. Our calculations also showed that LTM isn't among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? 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 32 percentage points since May 2014 through March 12, 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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Let's take a peek at the key hedge fund action regarding LATAM Airlines Group S.A. (NYSE:LTM).
How are hedge funds trading LATAM Airlines Group S.A. (NYSE:LTM)?
Heading into the first quarter of 2019, a total of 8 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 60% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards LTM over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in LATAM Airlines Group S.A. (NYSE:LTM) was held by Renaissance Technologies, which reported holding $11.2 million worth of stock at the end of September. It was followed by AQR Capital Management with a $6.3 million position. Other investors bullish on the company included Prince Street Capital Management, Millennium Management, and Citadel Investment Group.
As one would reasonably expect, some big names have jumped into LATAM Airlines Group S.A. (NYSE:LTM) headfirst. Prince Street Capital Management, managed by David Halpert, created the biggest position in LATAM Airlines Group S.A. (NYSE:LTM). Prince Street Capital Management had $3.7 million invested in the company at the end of the quarter. D. E. Shaw's D E Shaw also initiated a $0.5 million position during the quarter. The other funds with brand new LTM positions are John Overdeck and David Siegel's Two Sigma Advisors and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.
Let's go over hedge fund activity in other stocks similar to LATAM Airlines Group S.A. (NYSE:LTM). We will take a look at Oaktree Capital Group LLC (NYSE:OAK), Voya Financial Inc (NYSE:VOYA), Berry Global Group Inc (NYSE:BERY), and Old Republic International Corporation (NYSE:ORI). All of these stocks' market caps are similar to LTM's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position OAK,7,184200,0 VOYA,38,988902,0 BERY,43,2132320,7 ORI,23,410291,3 Average,27.75,928928,2.5 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.75 hedge funds with bullish positions and the average amount invested in these stocks was $929 million. That figure was $23 million in LTM's case. Berry Global Group Inc (NYSE:BERY) is the most popular stock in this table. On the other hand Oaktree Capital Group LLC (NYSE:OAK) is the least popular one with only 7 bullish hedge fund positions. LATAM Airlines Group S.A. (NYSE:LTM) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Unfortunately LTM wasn't in this group. Hedge funds that bet on LTM were disappointed as the stock returned 6.2% and underperformed the market. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 12 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.