We have been waiting for this for a year and finally the third quarter ended up showing a nice bump in the performance of small-cap stocks. Both the S&P 500 and Russell 2000 were up since the end of the second quarter, but small-cap stocks outperformed the large-cap stocks by double digits. This is important for hedge funds, which are big supporters of small-cap stocks, because their investors started pulling some of their capital out due to poor recent performance. It is very likely that equity hedge funds will deliver better risk adjusted returns in the second half of this year. In this article we are going to look at how this recent market trend affected the sentiment of hedge funds towards Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) , and what that likely means for the prospects of the company and its stock.
Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) has experienced a decrease in enthusiasm from smart money lately. There were 11 hedge funds in our database with AAWW holdings at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as MBIA Inc. (NYSE:MBI), Tutor Perini Corp (NYSE:TPC), and CONE Midstream Partners LP (NYSE:CNNX) to gather more data points.
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We follow over 700 hedge funds and other institutional investors and by analyzing their quarterly 13F filings, we identify stocks that they are collectively bullish on and develop investment strategies based on this data. One strategy that outperformed the market over the last year involves selecting the 100 best-performing funds and identifying the 30 mid-cap stocks that they are collectively most bullish on. Over the past year, this strategy generated returns of 18%, topping the 8% gain registered by S&P 500 ETFs. We launched this strategy 2.5 years ago and it returned more than 39% since then, vs. 22% gain registered by the S&P 500 ETFs.
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With all of this in mind, let’s take a look at the recent action regarding Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW).
What does the smart money think about Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW)?
Heading into the fourth quarter of 2016, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -27% from the previous quarter. The graph below displays the number of hedge funds with bullish position in AAWW over the last 5 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Ken Fisher’s Fisher Asset Management has the number one position in Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), worth close to $52.4 million, comprising 0.1% of its total 13F portfolio. Coming in second is Royce & Associates, led by Chuck Royce, holding a $12.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Paul Marshall and Ian Wace’s Marshall Wace LLP, D E Shaw, one of the biggest hedge funds in the world, and Ken Grossman and Glen Schneider’s SG Capital Management. We should note that SG Capital Management is among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.
Now that we’ve mentioned the most bullish investors, let’s also take a look at some funds that dumped their entire stakes in the stock during the third quarter. It’s worth mentioning that Israel Englander’s Millennium Management dumped the biggest investment of the 700 funds studied by Insider Monkey, valued at close to $4.9 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also said goodbye to its stock, about $4.1 million worth.
Let’s also examine hedge fund activity in other stocks similar to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). These stocks are MBIA Inc. (NYSE:MBI), Tutor Perini Corp (NYSE:TPC), CONE Midstream Partners LP (NYSE:CNNX), and HFF, Inc. (NYSE:HF). This group of stocks’ market valuations match AAWW’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MBI | 20 | 214365 | 1 |
| TPC | 13 | 48902 | 1 |
| CNNX | 3 | 6327 | -1 |
| HF | 10 | 24228 | 0 |
As you can see these stocks had an average of 11.5 hedge funds with bullish positions and the average amount invested in these stocks was $73 million. That figure was $98 million in AAWW’s case. MBIA Inc. (NYSE:MBI) is the most popular stock in this table. On the other hand CONE Midstream Partners LP (NYSE:CNNX) is the least popular one with only 3 bullish hedge fund positions. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard MBI might be a better candidate to consider taking a long position in.
Disclosure: None
