So, billionaire hedge fund investor Paul Singer just decided to take some money off the table. It's one of the oldest moves in the book: you make a big bet, it pays off handsomely, and you cash in a few chips. The bet in question? Southwest Airlines (LUV).

Singer's hedge fund, Elliott Investment Management, sold roughly 5.3 million shares of the low-cost carrier, according to a recent regulatory filing. The timing is pretty sweet. The stock is trading nearly 75% above Elliott's average buy price of about $29.10. That's a nice return on investment by anyone's measure.

Here's the thing, though: this isn't an exit. It's a trim. Even after selling those millions of shares, Elliott still holds about 45 million shares. Southwest is reportedly still one of the fund's largest and highest-conviction positions. So Singer isn't running for the hills; he's just banking some profits on a thesis that has played out very well.

Why Southwest Took Off

So what was the thesis? It was essentially an activist push to improve profitability and modernize an airline with a famously quirky, decades-old operating model. And lately, Southwest has been doing just that.

The stock is up 68% over the past year and 23% year-to-date. A lot of that acceleration came after the airline gave investors some exceptionally strong guidance. It's now projecting at least $4 per share in adjusted earnings for 2026. That's a dramatic jump from just 93 cents per share it expects for 2025.

Investors have also cheered the structural changes. Southwest is finally shifting to assigned seating, adding extra-legroom options, and creating new revenue streams like checked bag fees on certain fares. It's a big cultural shift for the airline, and the market is rewarding it. The transformation has validated Elliott's activist push and pushed the Dallas-based carrier to new highs.

Analysts are still broadly positive on the stock, with recent price targets suggesting about 17% more upside from where it trades now.

Taking Profits or Sending a Signal?

Elliott's decision to sell into this strength doesn't automatically mean it's lost confidence. This is standard hedge fund practice: you trim a position after large gains to lock in profits and rebalance your risk, especially after your main investment thesis has largely played out. You don't let all your winners ride forever without taking something off the table.

But the move does highlight an interesting shift in the story. A significant chunk of Southwest's recent stock price appreciation has been driven by what Wall Street calls "multiple expansion"—investors are willing to pay more for each dollar of earnings because their expectations for the future have improved. The narrative around the company has gotten much better.

The implication is that the easy gains, the ones you get just from convincing everyone the turnaround is real, might be in the rearview mirror. With the stock already pricing in a significant recovery, the next leg up will likely depend less on the promise of change and more on the hard, quarterly grind of execution. Can Southwest actually deliver on those ambitious profit targets? Can it smoothly implement all these new fees and seating changes without alienating its loyal customer base?

Elliott isn't leaving. It still has a massive stake. But by selling a slice, it is acknowledging that one phase of the investment—the bet on the plan—has paid off. The next phase is a bet on the results.