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Here’s What Hedge Funds Think About Spirit Airlines Incorporated (SAVE)

Abigail Fisher

Before we spend days researching a stock idea we'd like to take a look at how hedge funds and billionaire investors recently traded that stock. S&P 500 Index ETF (SPY) lost 2.6% in the first two months of the second quarter. Ten out of 11 industry groups in the S&P 500 Index lost value in May. The average return of a randomly picked stock in the index was even worse (-3.6%). This means you (or a monkey throwing a dart) have less than an even chance of beating the market by randomly picking a stock. On the other hand, the top 20 most popular S&P 500 stocks among hedge funds not only generated positive returns but also outperformed the index by about 3 percentage points through May 30th. In this article, we will take a look at what hedge funds think about Spirit Airlines Incorporated (NYSE:SAVE).

Spirit Airlines Incorporated (NYSE:SAVE) has experienced an increase in hedge fund interest of late. SAVE was in 34 hedge funds' portfolios at the end of the first quarter of 2019. There were 30 hedge funds in our database with SAVE holdings at the end of the previous quarter. Our calculations also showed that SAVE 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' 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 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 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.

[caption id="attachment_750230" align="aligncenter" width="473"] Brad Gerstner of Altimeter Capital[/caption]

Brad Gerstner Altimeter Capital

We're going to take a glance at the latest hedge fund action surrounding Spirit Airlines Incorporated (NYSE:SAVE).

What have hedge funds been doing with Spirit Airlines Incorporated (NYSE:SAVE)?

At the end of the first quarter, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 13% from the previous quarter. The graph below displays the number of hedge funds with bullish position in SAVE over the last 15 quarters. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

SAVE_june2019

The largest stake in Spirit Airlines Incorporated (NYSE:SAVE) was held by Renaissance Technologies, which reported holding $40.2 million worth of stock at the end of March. It was followed by Columbus Circle Investors with a $35.3 million position. Other investors bullish on the company included D E Shaw, Polar Capital, and Arlington Value Capital.

As one would reasonably expect, key money managers have been driving this bullishness. Rubric Capital Management, managed by David Rosen, created the most valuable position in Spirit Airlines Incorporated (NYSE:SAVE). Rubric Capital Management had $15.1 million invested in the company at the end of the quarter. Brad Gerstner's Altimeter Capital Management also made a $11.9 million investment in the stock during the quarter. The other funds with brand new SAVE positions are Robert Polak's Anchor Bolt Capital, Brandon Haley's Holocene Advisors, and Sara Nainzadeh's Centenus Global Management.

Let's also examine hedge fund activity in other stocks similar to Spirit Airlines Incorporated (NYSE:SAVE). We will take a look at China Biologic Products Holdings, Inc. (NASDAQ:CBPO), Manhattan Associates, Inc. (NASDAQ:MANH), Darling Ingredients Inc. (NYSE:DAR), and Aaron's, Inc. (NYSE:AAN). All of these stocks' market caps are closest to SAVE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBPO,8,130192,1 MANH,18,337275,-2 DAR,19,210442,1 AAN,20,244703,-1 Average,16.25,230653,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.25 hedge funds with bullish positions and the average amount invested in these stocks was $231 million. That figure was $382 million in SAVE's case. Aaron's, Inc. (NYSE:AAN) is the most popular stock in this table. On the other hand China Biologic Products Holdings, Inc. (NASDAQ:CBPO) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Spirit Airlines Incorporated (NYSE:SAVE) is more popular among hedge funds. 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. Unfortunately SAVE wasn't nearly as popular as these 20 stocks and hedge funds that were betting on SAVE were disappointed as the stock returned -11% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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