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Is ATSG A Good Stock To Buy Now?

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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. Insider Monkey finished processing 817 13F filings submitted by hedge funds and prominent investors. These filings show these funds' portfolio positions as of September 30th, 2020. What do these smart investors think about Air Transport Services Group Inc. (NASDAQ:ATSG)?

Is ATSG a good stock to buy now? Air Transport Services Group Inc. (NASDAQ:ATSG) was in 20 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 22. ATSG investors should pay attention to a decrease in hedge fund interest of late. There were 21 hedge funds in our database with ATSG holdings at the end of June. Our calculations also showed that ATSG isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MILLENNIUM MANAGEMENT
MILLENNIUM MANAGEMENT

Israel Englander of Millennium Management

Keeping this in mind we're going to analyze the fresh hedge fund action surrounding Air Transport Services Group Inc. (NASDAQ:ATSG).

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

At the end of the third quarter, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the second quarter of 2020. Below, you can check out the change in hedge fund sentiment towards ATSG over the last 21 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Air Transport Services Group Inc. (NASDAQ:ATSG) was held by Polar Capital, which reported holding $28.8 million worth of stock at the end of September. It was followed by Moab Capital Partners with a $27.1 million position. Other investors bullish on the company included Private Capital Management, Arrowstreet Capital, and Millennium Management. In terms of the portfolio weights assigned to each position Moab Capital Partners allocated the biggest weight to Air Transport Services Group Inc. (NASDAQ:ATSG), around 24.02% of its 13F portfolio. Private Capital Management is also relatively very bullish on the stock, dishing out 4.01 percent of its 13F equity portfolio to ATSG.

Since Air Transport Services Group Inc. (NASDAQ:ATSG) has witnessed falling interest from the aggregate hedge fund industry, it's easy to see that there is a sect of money managers who were dropping their full holdings in the third quarter. At the top of the heap, Ken Griffin's Citadel Investment Group dumped the biggest investment of the 750 funds followed by Insider Monkey, comprising about $6.9 million in stock. Paul Marshall and Ian Wace's fund, Marshall Wace LLP, also dumped its stock, about $2.5 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest dropped by 1 funds in the third quarter.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Air Transport Services Group Inc. (NASDAQ:ATSG) but similarly valued. These stocks are Addus Homecare Corporation (NASDAQ:ADUS), Virtusa Corporation (NASDAQ:VRTU), Kronos Worldwide, Inc. (NYSE:KRO), Vector Group Ltd (NYSE:VGR), Otter Tail Corporation (NASDAQ:OTTR), Cortexyme, Inc. (NASDAQ:CRTX), and Yelp Inc (NYSE:YELP). This group of stocks' market values resemble ATSG's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ADUS,17,90806,-2 VRTU,28,155153,15 KRO,10,35133,0 VGR,17,131684,-1 OTTR,10,58248,-2 CRTX,7,21069,1 YELP,27,374901,0 Average,16.6,123856,1.6 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.6 hedge funds with bullish positions and the average amount invested in these stocks was $124 million. That figure was $113 million in ATSG's case. Virtusa Corporation (NASDAQ:VRTU) is the most popular stock in this table. On the other hand Cortexyme, Inc. (NASDAQ:CRTX) is the least popular one with only 7 bullish hedge fund positions. Air Transport Services Group Inc. (NASDAQ:ATSG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ATSG is 62.2. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on ATSG as the stock returned 20.1% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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