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Is Spirit Airlines Inc. (SAVE) Going To Burn These Hedge Funds ?

Nina Todic

Is Spirit Airlines Inc. (NYSE:SAVE) 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 their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Spirit Airlines Inc. (NYSE:SAVE) an attractive investment today? Hedge funds are selling. The number of bullish hedge fund bets shrunk by 3 lately. Our calculations also showed that SAVE isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's flagship best performing hedge funds strategy returned 25.8% year to date (through May 30th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 40 percentage points since its inception (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn't rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let's check out the new hedge fund action encompassing Spirit Airlines Inc. (NYSE:SAVE).

What does smart money think about Spirit Airlines Inc. (NYSE:SAVE)?

At Q2's end, a total of 31 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from one quarter earlier. By comparison, 17 hedge funds held shares or bullish call options in SAVE a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with SAVE Positions

More specifically, Millennium Management was the largest shareholder of Spirit Airlines Inc. (NYSE:SAVE), with a stake worth $32.6 million reported as of the end of March. Trailing Millennium Management was Polar Capital, which amassed a stake valued at $28.7 million. Arlington Value Capital, Teewinot Capital Advisers, and Stelliam Investment Management were also very fond of the stock, giving the stock large weights in their portfolios.

Due to the fact that Spirit Airlines Inc. (NYSE:SAVE) has faced a decline in interest from the smart money, it's safe to say that there were a few money managers that slashed their entire stakes last quarter. Interestingly, Principal Global Investors's Columbus Circle Investors sold off the biggest investment of all the hedgies tracked by Insider Monkey, valued at close to $35.3 million in stock. John Overdeck and David Siegel's fund, Two Sigma Advisors, also sold off its stock, about $8.1 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 3 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Spirit Airlines Inc. (NYSE:SAVE). We will take a look at Community Bank System, Inc. (NYSE:CBU), White Mountains Insurance Group Ltd (NYSE:WTM), Global Blood Therapeutics Inc (NASDAQ:GBT), and Tegna Inc (NYSE:TGNA). This group of stocks' market values resemble SAVE's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CBU,12,29802,4 WTM,17,180077,1 GBT,30,583828,4 TGNA,15,443926,-11 Average,18.5,309408,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 18.5 hedge funds with bullish positions and the average amount invested in these stocks was $309 million. That figure was $302 million in SAVE's case. Global Blood Therapeutics Inc (NASDAQ:GBT) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Spirit Airlines Inc.(NYSE:SAVE) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 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 -23.9% during the third quarter 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 many of these stocks already outperformed the market in Q3.

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

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