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Did Hedge Funds Make The Right Call On Atlas Air Worldwide Holdings, Inc. (AAWW) ?

We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) and determine whether hedge funds skillfully traded this stock.

Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) was in 17 hedge funds’ portfolios at the end of March. AAWW investors should be aware of an increase in activity from the world’s largest hedge funds of late. There were 15 hedge funds in our database with AAWW positions at the end of the previous quarter. Our calculations also showed that AAWW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Sander Gerber of Hudson Bay Capital

Sander Gerber of Hudson Bay Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now we’re going to take a peek at the key hedge fund action surrounding Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW).

What does smart money think about Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2019. Below, you can check out the change in hedge fund sentiment towards AAWW over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

The largest stake in Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) was held by Fisher Asset Management, which reported holding $12.5 million worth of stock at the end of September. It was followed by Royce & Associates with a $8.1 million position. Other investors bullish on the company included Point72 Asset Management, Impala Asset Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Invenomic Capital Management allocated the biggest weight to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), around 3.38% of its 13F portfolio. Impala Asset Management is also relatively very bullish on the stock, designating 1.07 percent of its 13F equity portfolio to AAWW.

As aggregate interest increased, some big names have been driving this bullishness. Point72 Asset Management, managed by Steve Cohen, established the most valuable position in Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). Point72 Asset Management had $8 million invested in the company at the end of the quarter. Robert Bishop’s Impala Asset Management also initiated a $7.9 million position during the quarter. The other funds with new positions in the stock are Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Sander Gerber’s Hudson Bay Capital Management, and John Overdeck and David Siegel’s Two Sigma Advisors.

Let’s now review hedge fund activity in other stocks similar to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). These stocks are MAG Silver Corporation (NYSE:MAG), JinkoSolar Holding Co., Ltd. (NYSE:JKS), Cryolife Inc (NYSE:CRY), and New Mountain Finance Corp. (NYSE:NMFC). This group of stocks’ market valuations are closest to AAWW’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
MAG 8 80264 -2
JKS 7 41159 -5
CRY 7 35479 -3
NMFC 13 13539 -4
Average 8.75 42610 -3.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.75 hedge funds with bullish positions and the average amount invested in these stocks was $43 million. That figure was $57 million in AAWW’s case. New Mountain Finance Corp. (NYSE:NMFC) is the most popular stock in this table. On the other hand JinkoSolar Holding Co., Ltd. (NYSE:JKS) is the least popular one with only 7 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on AAWW as the stock returned 93.7% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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