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Hedge Funds Are Warming Up To Spirit Airlines Incorporated (SAVE)

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Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that's why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can't match. So should one consider investing in Spirit Airlines Incorporated (NYSE:SAVE)? The smart money sentiment can provide an answer to this question.

Spirit Airlines Incorporated (NYSE:SAVE) was in 29 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic is 39. SAVE has seen an increase in hedge fund interest of late. There were 24 hedge funds in our database with SAVE positions at the end of the first quarter. Our calculations also showed that SAVE isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Paul Reeder PAR Capital Management
Paul Reeder PAR Capital Management

Paul Reeder of PAR Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to view the key hedge fund action surrounding Spirit Airlines Incorporated (NYSE:SAVE).

Do Hedge Funds Think SAVE Is A Good Stock To Buy Now?

At the end of the second quarter, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from one quarter earlier. On the other hand, there were a total of 23 hedge funds with a bullish position in SAVE a year ago. With the smart money's capital changing hands, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

The largest stake in Spirit Airlines Incorporated (NYSE:SAVE) was held by Two Sigma Advisors, which reported holding $54.8 million worth of stock at the end of June. It was followed by PAR Capital Management with a $42.6 million position. Other investors bullish on the company included Citadel Investment Group, Renaissance Technologies, and Driehaus Capital. In terms of the portfolio weights assigned to each position Sonic Capital allocated the biggest weight to Spirit Airlines Incorporated (NYSE:SAVE), around 6.06% of its 13F portfolio. Teewinot Capital Advisers is also relatively very bullish on the stock, earmarking 1.6 percent of its 13F equity portfolio to SAVE.

Consequently, some big names were breaking ground themselves. Renaissance Technologies, assembled the largest position in Spirit Airlines Incorporated (NYSE:SAVE). Renaissance Technologies had $16 million invested in the company at the end of the quarter. Paul Marshall and Ian Wace's Marshall Wace LLP also initiated a $11.6 million position during the quarter. The following funds were also among the new SAVE investors: Steve Cohen's Point72 Asset Management, Noam Gottesman's GLG Partners, and Robert Vincent McHugh's Jade Capital Advisors.

Let's also examine hedge fund activity in other stocks similar to Spirit Airlines Incorporated (NYSE:SAVE). We will take a look at VNET Group, Inc. (NASDAQ:VNET), Clearway Energy, Inc. (NYSE:CWEN), Welbilt, Inc. (NYSE:WBT), AAON, Inc. (NASDAQ:AAON), Insmed Incorporated (NASDAQ:INSM), Cerevel Therapeutics Holdings, Inc. (NASDAQ:CERE), and Vishay Intertechnology, Inc. (NYSE:VSH). This group of stocks' market caps resemble SAVE's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VNET,23,264551,-7 CWEN,21,187962,-3 WBT,44,984182,16 AAON,17,42863,1 INSM,22,568387,0 CERE,19,358524,-3 VSH,29,500383,-3 Average,25,415265,0.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $415 million. That figure was $248 million in SAVE's case. Welbilt, Inc. (NYSE:WBT) is the most popular stock in this table. On the other hand AAON, Inc. (NASDAQ:AAON) is the least popular one with only 17 bullish hedge fund positions. Spirit Airlines Incorporated (NYSE:SAVE) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for SAVE is 54.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24.9% in 2021 through October 15th and beat the market again by 4.5 percentage points. Unfortunately SAVE wasn't nearly as popular as these 5 stocks and hedge funds that were betting on SAVE were disappointed as the stock returned -21.1% since the end of June (through 10/15) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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