Is Air Transport Services Group Inc. (ATSG) A Good Stock To Buy?

Reymerlyn Martin
Updated

Does Air Transport Services Group Inc. (NASDAQ:ATSG) represent a good buying opportunity at the moment? Let’s briefly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail unconceivably on some occasions, but their stock picks have been generating superior risk-adjusted returns on average over the years.

Is Air Transport Services Group Inc. (NASDAQ:ATSG) a buy here? The best stock pickers are becoming less confident. The number of long hedge fund bets retreated by 2 in recent months. Our calculations also showed that ATSG isn't among the 30 most popular stocks among hedge funds.

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.

MILLENNIUM MANAGEMENT
MILLENNIUM MANAGEMENT

Let's analyze the new hedge fund action regarding Air Transport Services Group Inc. (NASDAQ:ATSG).

How are hedge funds trading Air Transport Services Group Inc. (NASDAQ:ATSG)?

Heading into the fourth quarter of 2018, a total of 20 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -9% from the second quarter of 2018. On the other hand, there were a total of 22 hedge funds with a bullish position in ATSG at the beginning of this year. With hedgies' sentiment swirling, there exists a select group of key hedge fund managers who were boosting their holdings significantly (or already accumulated large positions).

ATSG_dec2018
ATSG_dec2018

The largest stake in Air Transport Services Group Inc. (NASDAQ:ATSG) was held by Millennium Management, which reported holding $32.6 million worth of stock at the end of September. It was followed by Moab Capital Partners with a $30.3 million position. Other investors bullish on the company included Red Mountain Capital, Private Capital Management, and ACK Asset Management.

Since Air Transport Services Group Inc. (NASDAQ:ATSG) has faced bearish sentiment from the aggregate hedge fund industry, logic holds that there lies a certain "tier" of funds that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Paul Tudor Jones's Tudor Investment Corp sold off the biggest position of all the hedgies followed by Insider Monkey, valued at an estimated $0.5 million in stock, and Matthew Hulsizer's PEAK6 Capital Management was right behind this move, as the fund cut about $0.4 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds by the end of the third quarter.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Air Transport Services Group Inc. (NASDAQ:ATSG) but similarly valued. We will take a look at Beneficial Bancorp, Inc. (NASDAQ:BNCL), Casa Systems, Inc. (NASDAQ:CASA), ePlus Inc. (NASDAQ:PLUS), and United Fire Group, Inc. (NASDAQ:UFCS). This group of stocks' market valuations are closest to ATSG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BNCL,9,95416,-3 CASA,10,29535,-2 PLUS,10,29996,1 UFCS,8,21268,-2 Average,9.25,44054,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 9.25 hedge funds with bullish positions and the average amount invested in these stocks was $44 million. That figure was $232 million in ATSG's case. Casa Systems, Inc. (NASDAQ:CASA) is the most popular stock in this table. On the other hand United Fire Group, Inc. (NASDAQ:UFCS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Air Transport Services Group Inc. (NASDAQ:ATSG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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