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Were Hedge Funds Right About Air Transport Services Group Inc. (ATSG)?

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Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Air Transport Services Group Inc. (NASDAQ:ATSG) in this article.

Is Air Transport Services Group Inc. (NASDAQ:ATSG) a bargain? Prominent investors were taking a bullish view. The number of bullish hedge fund bets went up by 2 recently. Air Transport Services Group Inc. (NASDAQ:ATSG) was in 18 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 22. Our calculations also showed that ATSG isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

To most stock holders, hedge funds are seen as slow, outdated financial vehicles of years past. While there are greater than 8000 funds trading at the moment, We choose to focus on the top tier of this club, about 850 funds. These hedge fund managers have their hands on the lion's share of the hedge fund industry's total capital, and by monitoring their best equity investments, Insider Monkey has figured out numerous investment strategies that have historically outperformed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Michael Gelband of ExodusPoint Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. Keeping this in mind we're going to take a gander at the recent hedge fund action surrounding Air Transport Services Group Inc. (NASDAQ:ATSG).

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

Heading into the second quarter of 2021, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the fourth quarter of 2020. By comparison, 22 hedge funds held shares or bullish call options in ATSG a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

Is ATSG A Good Stock To Buy?
Is ATSG A Good Stock To Buy?

Among these funds, Polar Capital held the most valuable stake in Air Transport Services Group Inc. (NASDAQ:ATSG), which was worth $19.2 million at the end of the fourth quarter. On the second spot was Private Capital Management which amassed $18.8 million worth of shares. Mountaineer Partners Management, Millennium Management, and Intrinsic Edge Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. 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 6.06% of its 13F portfolio. Mountaineer Partners Management is also relatively very bullish on the stock, designating 5.6 percent of its 13F equity portfolio to ATSG.

Consequently, key hedge funds have been driving this bullishness. Mountaineer Partners Management, managed by Mark Lee, assembled the most outsized position in Air Transport Services Group Inc. (NASDAQ:ATSG). Mountaineer Partners Management had $8 million invested in the company at the end of the quarter. Ken Griffin's Citadel Investment Group also made a $1.2 million investment in the stock during the quarter. The following funds were also among the new ATSG investors: Brandon Haley's Holocene Advisors, Matthew Hulsizer's PEAK6 Capital Management, and Michael Gelband's ExodusPoint Capital.

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 Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW), Silk Road Medical, Inc. (NASDAQ:SILK), Kymera Therapeutics, Inc. (NASDAQ:KYMR), Evolent Health Inc (NYSE:EVH), NBT Bancorp Inc. (NASDAQ:NBTB), Monmouth Real Estate Investment Corp. (NYSE:MNR), and Sapiens International Corporation N.V. (NASDAQ:SPNS). This group of stocks' market caps match ATSG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AAWW,29,336252,-6 SILK,21,118208,-6 KYMR,16,346189,1 EVH,22,344398,4 NBTB,6,10908,-5 MNR,13,58825,1 SPNS,12,46366,-2 Average,17,180164,-1.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $180 million. That figure was $73 million in ATSG's case. Atlas Air Worldwide Holdings, Inc. (NASDAQ:AAWW) is the most popular stock in this table. On the other hand NBT Bancorp Inc. (NASDAQ:NBTB) is the least popular one with only 6 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 57.6. 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 28.5% in 2021 through July 23rd and beat the market again by 10.1 percentage points. Unfortunately ATSG wasn't nearly as popular as these 5 stocks and hedge funds that were betting on ATSG were disappointed as the stock returned -21.8% since the end of March (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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