Why Atlas Corp (ATCO) Stock is a Compelling Investment Case

Miller Value Partners recently released its Q3 2020 Investor Letter, a copy of which you can download here. During the third quarter, the Deep Value Strategy led the overall marketplace and S&P 1500 Value index, generating returns in excess of 25%. You should check out Miller Value Partners’ top 5 stock picks for investors to buy right now, which could be the biggest winners of this year.

In the said letter, Miller Value Partners highlighted a few stocks and Atlas Corp. (NYSE:ATCO) is one of them. Atlas Corp. (NYSE:ATCO) operates as an asset manager and operator. Year-to-date, Atlas Corp. (NYSE:ATCO) stock lost 33.1% and on November 3rd it had a closing price of $9.51. Here is what Miller Value Partners said:

“Finally, I’d like to highlight Atlas Corp (ATCO), we have been increasing our investment over the past couple of months. Atlas was formed earlier this year as a holding company. The entity owns Seaspan, the largest independent owner and operator of containerships in the world, and APR, the largest mobile gas turbine fleet owner and operator in the world, providing power solutions to customers, including large corporations and government-sponsored utilities. Atlas is led by CEO Bing Chen and Chairman David Sokol. David had a fantastic track record building MidAmerican Energy, which was purchased by Berkshire Hathaway and renamed Berkshire Energy. In 20 years at MidAmerican Energy, Sokol grew revenue from $116M to $11B and net income increased from $27M to $1.2B, a compounded growth rate of 22.4%. During this time, their ROE averaged 23%. Atlas has partnered with Fairfax and the Washington Family who control nearly 60% of the float and are highly supportive of creating long-term value for shareholders. Atlas has a significant backlog, more than $4B of long-term reoccurring revenue contracts, and the company has significantly reduced its capital intensity in the Seaspan business. The stock has been under pressure to start the year as world trade shipping volumes were down 5-10%, impacted by Covid-19. Atlas management continues to exceed expectations, maintaining Seaspan’s fleet utilization in the upper 90s. We see the potential for the company to generate significant free cash flow over the next couple of years and currently has a normalized free cash flow yield greater than 30%. Atlas shares are very attractive at a 40% discount to book value, less than 3x cash flow and the company also possesses an attractive 5.4% dividend yield.”

In Q1 2020, the number of bullish hedge fund positions on Atlas Corp. (NYSE:ATCO) stock decreased by about 13% from the previous quarter (see the chart here), so a number of other hedge fund managers don’t believe in ATCO’s growth potential. Our calculations showed that Atlas Corp. (NYSE:ATCO) isn’t ranked among the 30 most popular stocks among hedge funds.

The top 10 stocks among hedge funds returned 185% since the end of 2014 and outperformed the S&P 500 Index ETFs by more than 109 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Below you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.

Video: Top 5 Stocks Among Hedge Funds

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