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Is Alaska Air (ALK) Stock a Buy?

Confluence Investment Management recently released its Q1 2020 Investor Letter, a copy of which you can download below. The All Cap Value Fund posted a return of -22.4% for the quarter (net of fees), outperforming its benchmark, the Russell 3000 Value Index which returned -27.3% in the same quarter. You should check out Confluence Investment Management’s top 5 stock picks for investors to buy right now, which could be the biggest winners of the stock market crash. There weren’t a lot of funds who could deliver these kinds of returns without shorting the market or using aggressive put options.

In the said letter, Confluence Investment Management highlighted a few stocks and Alaska Air Group Inc. (NYSE:ALK) is one of them. Alaska Air Group is an airline holding company. Year-to-date, Alaska Air Group Inc. (NYSE:ALK) stock lost 54.2% and on May 22nd it had a closing price of $31.02. Here is what Confluence Investment Management said:

"We also took a partial position in Alaska Air due to its strong franchise value in the airline industry. Alaska is the fifth largest domestic airline and has a reputation for great client service, particularly on the West Coast where it has a near-fanatical following. The company has one of the strongest balance sheets in the industry with only $550 million of net debt versus $4.3 billion of book equity. The COVID-19 outbreak has upended the airline industry and we’ve refrained from taking a full position in Alaska Air. As always, we will continue to monitor the investment and make changes as we deem prudent."

In Q4 2019, the number of bullish hedge fund positions on Alaska Air Group Inc. (NYSE:ALK) stock increased by about 11% from the previous quarter (see the chart here), so a number of other hedge fund managers seem to agree with ALK’s growth potential. Our calculations showed that Alaska Air Group Inc. (NYSE:ALK) isn't among the 30 most popular stocks among hedge funds.

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