The Alpha Algorithm Strategies Pour into This Big Airline Stock

Formerly known as United Airlines Corp., United Continental Holdings, Inc. (UAL) is the parent company for United Airlines and Continental Airlines and has received negative publicity recently.

Together with United Express, Continental Express and Continental Connection, these airlines operate throughout the Americas, Europe, Asia and Africa from their hubs in Chicago, Cleveland, Denver, Guam, Houston, Los Angeles, New York, San Francisco, Tokyo and Washington, D.C. United Continental Holdings, Inc., is headquartered in Chicago, where it dragged a paid passenger off a flight on April 9 and the resulting fallout temporarily hurt its stock price, as shown in the chart below.

United Continental Holdings (UAL) versus the S&P 500 over one year

Ten 10 Investment Strategies Betting on United Continental Holdings (UAL)

1. Hedge Fund Alpha

Based on publicly available disclosures, successful hedge fund managers are investing in the stock.

2. Goldman Sachs’ Active Beta

The stock is selected according to four factors — value, quality, momentum and low volatility. These, in turn, are based on criteria including book value, sales and cash flow scaled by share price, profit/assets or return on equity (ROE), risk-adjusted returns and daily standard deviation of returns.

3. Hedge Fund Gurus

The stock is one of the top U.S.-listed equity positions reported on Form 13F by select hedge funds with concentrated top holdings.

4. Shareholder Yield

It is one of the companies (a) paying cash dividends, (b) engaging in net share repurchases and (c) paying down balance-sheet debt.

5. Insider Sentiment

One of 100 equally weighted U.S.-listed large- and mid-cap stocks chosen based on trading in company stock by corporate insiders, price momentum and trailing 12-month volatility. Specifically, it looks at the increase in insider holdings.

6. Share Buybacks

The company’s outstanding shares have been reduced by at least 5% in the previous year through share repurchases.

7. Large-Cap Alpha Growth

The company has been chosen as part of an alpha-seeking index that selects and weights growth stocks from the S&P 500 Growth Index. The proprietary methodology uses price appreciation — among more traditional factors — and weights the constituents based on their respective growth scores.

8. Pure Growth

The company is part of a strategy that selects companies from the S&P 500 Index, based on three growth factors: current internal growth rate, historical earnings per share (EPS) growth and historical sales/share growth.

9. Large-Cap Alpha Core

The stock is one of a tiered equal-weighted index of large-cap stocks selected from the S&P 500 and is expected to outperform the broader large-cap space based on an intricate methodology of ranking stocks according to their recent performance.

10. Market Legends’ Pick

The stock is part of a strategy that replicates methods of a handful of legendary investors, using 20-plus models built on fundamental valuation metrics, rather than technical factors.

Recommendation

Buy United Continental Holdings (UAL) at market today, and place your initial stop at $64.00.

Options

If you want to play the options, I recommend the June $75 calls. (UAL170616C00075000), which last traded at $2.76 and expire on June 16.

Portfolio Update

Texas Instruments (TXN) has fallen out of favor with the Alpha Algorithm.

So this week, I am recommending that you sell this position for a 5.47% gain.

Sincerely,

Nicholas A. Vardy