Atlas Air Worldwide Holdings, Inc. (AAWW): Hedge Fund Interest Taking A Nosedive

We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds’ top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW).

Is Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) a bargain? Prominent investors are turning less bullish. The number of bullish hedge fund positions decreased by 3 in recent months. Our calculations also showed that AAWW isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Chuck Royce

Chuck Royce of Royce & Associates

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds‘ buy/sell signals. We’re going to analyze the recent hedge fund action surrounding Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW).

How are hedge funds trading Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW)?

Heading into the fourth quarter of 2019, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of -19% from the second quarter of 2019. The graph below displays the number of hedge funds with bullish position in AAWW over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Fisher Asset Management held the most valuable stake in Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), which was worth $13 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $5.2 million worth of shares. Intrinsic Edge Capital, Millennium Management, and Royce & Associates were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Intrinsic Edge Capital allocated the biggest weight to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), around 0.56% of its 13F portfolio. Royce & Associates is also relatively very bullish on the stock, earmarking 0.02 percent of its 13F equity portfolio to AAWW.

Seeing as Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) has faced falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of money managers that elected to cut their entire stakes in the third quarter. At the top of the heap, Michael Platt and William Reeves’s BlueCrest Capital Mgmt. dumped the largest investment of the “upper crust” of funds tracked by Insider Monkey, valued at close to $13.2 million in stock. John R. Wagner’s fund, SCW Capital Management, also sold off its stock, about $11.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 3 funds in the third quarter.

Let’s now review hedge fund activity in other stocks similar to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). These stocks are Tredegar Corporation (NYSE:TG), Akero Therapeutics, Inc. (NASDAQ:AKRO), Intellia Therapeutics, Inc. (NASDAQ:NTLA), and Customers Bancorp Inc (NYSE:CUBI). This group of stocks’ market values resemble AAWW’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TG 12 73036 1
AKRO 10 104249 -5
NTLA 11 13017 -1
CUBI 12 47860 0
Average 11.25 59541 -1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 11.25 hedge funds with bullish positions and the average amount invested in these stocks was $60 million. That figure was $28 million in AAWW’s case. Tredegar Corporation (NYSE:TG) is the most popular stock in this table. On the other hand Akero Therapeutics, Inc. (NASDAQ:AKRO) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately AAWW wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on AAWW were disappointed as the stock returned 3.4% during the first two months of the fourth 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 70 percent of these stocks already outperformed the market in Q4.

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