In this article we are going to use hedge fund sentiment as a tool and determine whether Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) undervalued? Investors who are in the know were taking a bearish view. The number of bullish hedge fund bets went down by 6 recently. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) was in 29 hedge funds’ portfolios at the end of March. The all time high for this statistic is 35. Our calculations also showed that AAWW isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 S&P 500 ETFs by 115 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 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.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s view the key hedge fund action regarding Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW).
Do Hedge Funds Think AAWW Is A Good Stock To Buy Now?
At the end of March, a total of 29 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from the previous quarter. By comparison, 17 hedge funds held shares or bullish call options in AAWW a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Greenlight Capital held the most valuable stake in Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), which was worth $91.6 million at the end of the fourth quarter. On the second spot was Royce & Associates which amassed $34.1 million worth of shares. Maple Rock Capital, Hill City Capital, and Fisher Asset Management 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 Hill City Capital allocated the biggest weight to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), around 9.27% of its 13F portfolio. Brightline Capital is also relatively very bullish on the stock, designating 8.16 percent of its 13F equity portfolio to AAWW.
Seeing as Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) has experienced falling interest from the aggregate hedge fund industry, it’s easy to see that there was a specific group of fund managers that decided to sell off their entire stakes heading into Q2. It’s worth mentioning that Steven Ng and Andrew Mitchell’s Ophir Asset Management dumped the largest investment of the 750 funds monitored by Insider Monkey, worth an estimated $15.4 million in stock. Stuart J. Zimmer’s fund, Zimmer Partners, also dropped its stock, about $9.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 6 funds heading into Q2.
Let’s go over hedge fund activity in other stocks similar to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). We will take a look at Silk Road Medical, Inc. (NASDAQ:SILK), Kymera Therapeutics, Inc. (NASDAQ:KYMR), Evolent Health Inc (NYSE:EVH), NBT Bancorp Inc. (NASDAQ:NBTB), Monmouth Real Estate Investment Corp. (NYSE:MNR), Sapiens International Corporation N.V. (NASDAQ:SPNS), and Scholar Rock Holding Corporation (NASDAQ:SRRK). All of these stocks’ market caps resemble AAWW’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 14.9 hedge funds with bullish positions and the average amount invested in these stocks was $156 million. That figure was $336 million in AAWW’s case. Evolent Health Inc (NYSE:EVH) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is more popular among hedge funds. Our overall hedge fund sentiment score for AAWW is 73.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still managed to beat the market by 6 percentage points. Hedge funds were also right about betting on AAWW, though not to the same extent, as the stock returned 14% since the end of March (through July 2nd) and outperformed the market as well.
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Disclosure: None. This article was originally published at Insider Monkey.