Greenlight Capital, an investment management firm, published its “Global Growth Fund” second quarter 2021 investor letter – a copy of which can be downloaded here. A quarterly return of -2.9% was recorded by the fund for the second quarter of 2021, compared to 8.5% for its e S&P 500 benchmark. You can view the fund’s top 5 holdings to have an idea about their top bets for 2021.
In the Q2 2021 investor letter of Greenlight Capital, the fund mentioned Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW), and discussed its stance on the firm. Atlas Air Worldwide Holdings, Inc. is a Harrison, New York-based cargo and passenger charter airline, that currently has a $1.9 billion market capitalization. AAWW delivered a 22.79% return since the beginning of the year, extending its 12-month returns to 28.59%. The stock closed at $66.97 per share on July 30, 2021.
Here is what Greenlight Capital has to say about Atlas Air Worldwide Holdings, Inc. in its Q2 2021 investor letter:
“Air Freight
COVID caused a dramatic reduction in passenger aviation. Passenger planes often carry freight in their bellies. With planes grounded, capacity came out of the industry. At the same time, freight demand expanded both due to the recovering economy and growing ecommerce, which often emphasizes air shipments. While there has been some recovery in passenger aviation, airlines are emphasizing narrow-body planes, which carry less freight than wide-body planes. Compared to 2019, current air freight demand is about 10% higher and capacity is about 10% lower. The result is that cargo rates have exploded.
Supply will be slow to come on-line. Some passenger planes are being converted to freighters, but conversion capacity for wide-bodies is limited and the aggregate impact of this will be modest. Meanwhile, air freight companies trade at tiny multiples of what investors assume to be peak profits. The implied cost of equity is quite high, which makes it difficult to justify adding assets. As a result, air freight companies are in no rush to order new planes, and in any case, new orders would take several years to build. The result is rates and profits are likely to be higher than expected for quite some time.
We own Atlas Air Worldwide (AAWW), which is poised to benefit. It trades at around 5x this year’s consensus earnings estimates.”
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Based on our calculations, Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW) was not able to clinch a spot in our list of the 30 Most Popular Stocks Among Hedge Funds. AAWW was in 29 hedge fund portfolios at the end of the first quarter of 2021, compared to 35 funds in the fourth quarter of 2020. Atlas Air Worldwide Holdings, Inc. (NASDAQ: AAWW) delivered a -1.38% return in the past 3 months.
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.
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Disclosure: None. This article is originally published at Insider Monkey.
