Is Atlanticus Holdings Corp (ATLC) A Good Stock To Buy?

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money 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 (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Atlanticus Holdings Corp (NASDAQ:ATLC).

Is ATLC a good stock to buy? The smart money was becoming hopeful. The number of bullish hedge fund positions moved up by 2 lately. Atlanticus Holdings Corp (NASDAQ:ATLC) was in 4 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 4. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that ATLC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 2 hedge funds in our database with ATLC positions at the end of the fourth quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Jason Ader of Cumberland Associates / Springowl Associates

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, an activist hedge fund wants to buy this $27 biotech stock for $50. So, we recommended a long position to our monthly premium newsletter subscribers. We go through lists like the 10 best battery 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 take a gander at the key hedge fund action surrounding Atlanticus Holdings Corp (NASDAQ:ATLC).

Do Hedge Funds Think ATLC Is A Good Stock To Buy Now?

Heading into the second quarter of 2021, a total of 4 of the hedge funds tracked by Insider Monkey were long this stock, a change of 100% from the previous quarter. On the other hand, there were a total of 4 hedge funds with a bullish position in ATLC a year ago. With hedgies’ capital changing hands, there exists a select group of notable hedge fund managers who were adding to their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Renaissance Technologies has the most valuable position in Atlanticus Holdings Corp (NASDAQ:ATLC), worth close to $5.9 million, comprising less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Citadel Investment Group, led by Ken Griffin, holding a $1.8 million position; less than 0.1%% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism encompass Andrew Wallach and Jason Ader’s Cumberland Associates / Springowl Associates, Roger Ibbotson’s Zebra Capital Management and Ken Griffin’s Citadel Investment Group. In terms of the portfolio weights assigned to each position Cumberland Associates / Springowl Associates allocated the biggest weight to Atlanticus Holdings Corp (NASDAQ:ATLC), around 5.6% of its 13F portfolio. Zebra Capital Management is also relatively very bullish on the stock, dishing out 0.8 percent of its 13F equity portfolio to ATLC.

Now, key money managers were breaking ground themselves. Cumberland Associates / Springowl Associates, managed by Andrew Wallach and Jason Ader, created the most valuable position in Atlanticus Holdings Corp (NASDAQ:ATLC). Cumberland Associates / Springowl Associates had $1.1 million invested in the company at the end of the quarter. Roger Ibbotson’s Zebra Capital Management also made a $0.7 million investment in the stock during the quarter. The only other fund with a brand new ATLC position is Ken Griffin’s Citadel Investment Group.

Let’s go over hedge fund activity in other stocks similar to Atlanticus Holdings Corp (NASDAQ:ATLC). We will take a look at AVITA Medical, Inc. (NASDAQ:RCEL), Crescent Capital BDC, Inc. (NASDAQ:CCAP), Hoegh LNG Partners LP (NYSE:HMLP), FLEX LNG Ltd. (NYSE:FLNG), Nam Tai Property Inc (NYSE:NTP), Verso Corporation (NYSE:VRS), and SOC Telemed, Inc. (NASDAQ:TLMD). This group of stocks’ market valuations match ATLC’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 8.1 hedge funds with bullish positions and the average amount invested in these stocks was $53 million. That figure was $10 million in ATLC’s case. Verso Corporation (NYSE:VRS) is the most popular stock in this table. On the other hand FLEX LNG Ltd. (NYSE:FLNG) is the least popular one with only 1 bullish hedge fund positions. Atlanticus Holdings Corp (NASDAQ:ATLC) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for ATLC is 47.7. 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 17.2% in 2021 through June 11th and still beat the market by 3.3 percentage points. A small number of hedge funds were also right about betting on ATLC as the stock returned 28.8% since the end of the first quarter (through 6/11) and outperformed the market by an even larger margin.

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