Hedge funds and other investment firms run by legendary investors like Israel Englander and Ray Dalio are entrusted to manage billions of dollars of accredited investors’ money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) shares haven’t seen a lot of action during the third quarter. Overall, hedge fund sentiment was unchanged. The stock was in 15 hedge funds’ portfolios at the end of September. At the end of this article we will also compare AAWW to other stocks including Corcept Therapeutics Incorporated (NASDAQ:CORT), The Gabelli Equity Trust Inc. (NYSE:GAB), and LexinFintech Holdings Ltd. (NASDAQ:LX) to get a better sense of its popularity.
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 market by 18 percentage points since May 2014 through December 3, 2018 (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.
Let’s take a glance at the new hedge fund action regarding Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW).
How are hedge funds trading Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW)?
At the end of the third quarter, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, no change from the previous quarter. The graph below displays the number of hedge funds with bullish position in AAWW over the last 13 quarters. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).
More specifically, Fisher Asset Management was the largest shareholder of Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), with a stake worth $37.8 million reported as of the end of September. Trailing Fisher Asset Management was Daruma Asset Management, which amassed a stake valued at $37.4 million. Royce & Associates, Lonestar Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Because Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) has witnessed falling interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Israel Englander’s Millennium Management sold off the largest position of the 700 funds followed by Insider Monkey, comprising an estimated $2.5 million in call options. Matthew Hulsizer’s fund, PEAK6 Capital Management, also dumped its call options, about $0.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks similar to Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW). These stocks are Corcept Therapeutics Incorporated (NASDAQ:CORT), The Gabelli Equity Trust Inc. (NYSE:GAB), LexinFintech Holdings Ltd. (NASDAQ:LX), and PRA Group, Inc. (NASDAQ:PRAA). This group of stocks’ market caps match AAWW’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CORT | 15 | 152727 | -1 |
| GAB | 1 | 5589 | -1 |
| LX | 8 | 11015 | 4 |
| PRAA | 7 | 167108 | -3 |
| Average | 7.75 | 84110 | -0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.75 hedge funds with bullish positions and the average amount invested in these stocks was $84 million. That figure was $141 million in AAWW’s case. Corcept Therapeutics Incorporated (NASDAQ:CORT) is the most popular stock in this table. On the other hand The Gabelli Equity Trust Inc. (NYSE:GAB) is the least popular one with only 1 bullish hedge fund positions. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard CORT might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.
