Hedge Funds Still Like Airliners, Prefer Southwest To All Others

Credit Suisse analyst Julie Yates just released the results of the firm’s latest survey of 71 hedge funds and long-only airline investors. Here’s a summary of the key findings.

More than half (61 percent) of respondents believe that airline stocks will outperform the market in 2016.
In terms of industry concerns, respondents named weak unit revenue trends resulting from too much capacity as the top issue for airline stocks. Respondents are also concerned about demand and the potential for a U.S. recession.

Despite maintaining a bullish overall outlook, hedge funds have reduced their long positions and increased their overall short exposure to airlines in the past six months.

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In terms of top stock picks, Southwest Airlines Co LUV was the consensus top airline stock, receiving more than twice as many votes as any other stock. The second most popular stock was Delta Air Lines, Inc. DAL, and the most popular Underweight pick was JetBlue Airways Corporation JBLU.

When it comes to long-term investing strategies, long-only investors look for airlines with strong balance sheets and aggressive capital return programs, including Delta, Southwest and Alaska Air Group, Inc. ALK.

So far this year, the U.S. Global Jets ETF JETS is up 0.2 percent.

Disclosure: the author holds no position in the stocks mentioned.