4. Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW)
Value: $94,250,000
Percent of David Einhorn’s 13F Portfolio: 5.66%
No. of Hedge Fund Holders: 35
David Einhorn’s Greenlight Capital has a $94 million stake in aircraft leasing company Atlas Air Worldwide. The stock is up over 268% over the last 12 months. In the fourth quarter, the company’s non-GAAP EPS came in at $4.83, beating the Street’s estimates by $1.32. Revenue in the quarter jumped 24% to $932.48 million, surpassing the estimates by about $54 million.
As of the end of the fourth quarter, 35 hedge funds in Insider Monkey’s database of 887 funds held stakes in AAWW, compared to 27 funds in the third quarter. David Einhorn’s Greenlight Capital is the biggest stakeholder in the company, with 1.7 million shares, worth $94.3 million.
In their Q2 2020 investor letter, Greenlight Capital highlighted a few stocks and Atlas Air Worldwide Holdings Inc (NASDAQ:AAWW) is one of them. Here is what Greenlight Capital said:
“We also added a new large equity position in Atlas Air Worldwide Holdings (AAWW) at an average price of $36.28. AAWW operates the world’s largest fleet of Boeing 747 freighters and is a sizable owner, operator and lessor of 767, 777 and 737 freighters.
Prior to COVID-19, approximately 50% of global airfreight was carried in the belly of passenger planes, mostly on long-haul international flights. With long-haul international passenger traffic down more than 90% year-over-year (and likely to be the last segment of passenger travel to recover), there is a historic shortage of airfreight capacity. After an initial surge in demand to ship Personal Protective Equipment (“PPE”), the market is transitioning back towards more traditional airfreight products such as electronics, capital goods, perishables and pharmaceuticals. Market shipping rates increased by over 100% year-overyear in the second quarter and are expected to remain strong. As a result, we expect AAWW to see significant growth in earnings per share in 2020 (from the $5.24 it earned in 2019).
In response to the capacity shortage, some passenger widebodies are temporarily operating as freighters (nicknamed “preighters”), particularly to fulfill urgent PPE demand. However, due to lower cargo capacity, more cumbersome loading and unloading and similar overall trip costs, preighters cost roughly 2.5x as much per ton shipped compared to dedicated freighters. Preighter activity departing from China and Hong Kong has already declined by more than 50% since May as shipping rates have partially normalized. Over the next three years, we don’t expect many large freighters to be either produced or converted from passenger service given the cost and lead-times involved.
While most of the increase in earnings will occur in AAWW’s charter segment, AAWW also has attractive and substantial long-term contractual relationships serving DHL and Amazon, which stand to benefit from the growth in e-commerce and relatively steady business supporting the U.S. military. We acquired our shares at 0.54x Q1 2020 tangible book value and approximately 7x 2019 earnings that were achieved during much more competitive conditions. AAWW ended the quarter at $43.03.”
