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The Bottom Fishing Club: Atlas Air Worldwide

Paul Franke profile picture
Paul Franke


  • Atlas Air is one of the most undervalued companies in America based on 2020 cash generation.
  • E-commerce shipping is bottlenecked for capacity, and Atlas is a leading outsource supplier in the airfreight industry.
  • Technical trading momentum indicators are flashing a "buckle-up" signal for the potential of another sharp price advance.

jumbo jet airplane landing in storm
Photo by guvendemir/E+ via Getty Images

Believe it or not, on the current quote of $60, $13.64 in earnings per share and $28.26 in free cash flow was generated by Atlas Air Worldwide (NASDAQ:AAWW) during 2020! And, the continuing explosion

This article was written by

Paul Franke profile picture
Nationally ranked stock picker for 30 years. Victory Formation and Bottom Fishing Club quant-sort pioneer.....Paul Franke is a private investor and speculator with 37 years of trading experience. Mr. Franke was Editor and Publisher of the Maverick Investor® newsletter during the 1990s, widely quoted by CNBC®, Barron’s®, the Washington Post® and Investor’s Business Daily®. Paul was consistently ranked among top investment advisors nationally for stock market and commodity macro views by Timer Digest® during the 1990s. Mr. Franke was ranked #1 in the Motley Fool® CAPS stock picking contest during parts of 2008 and 2009, out of 60,000+ portfolios. Mr. Franke was Director of Research at Quantemonics Investing® from 2010-13, running several model portfolios on the Covestor.com mirror platform (including the least volatile, lowest beta, fully-invested equity portfolio on the site). As of April 2023, he was ranked in the Top 5% of bloggers by TipRanks® for stock picking performance on positions held one year. A contrarian stock picking style, along with daily algorithm analysis of fundamental and technical data have been developed into a system for finding stocks, named the “Victory Formation.” Supply/demand imbalances signaled by specific stock price and volume movements are a critical part of this formula for success. Mr. Franke suggests investors use 10% or 20% stop-loss levels on individual choices and a diversified approach of owning at least 50 well positioned favorites to achieve regular stock market outperformance. The short sale of securities in overvalued, weak momentum stocks as pair trades and hedges is also a part of the Victory Formation long/short portfolio design. "Bottom Fishing Club" articles focus on deep-value candidates or stocks experiencing a major reversal in technical momentum to the upside. "Volume Breakout Report" articles discuss positive trend changes backed by strong price and volume trading action.

Analyst’s Disclosure: I am/we are long AAWW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

This writing is for informational purposes only. All opinions expressed herein are not investment recommendations, and are not meant to be relied upon in investment decisions. The author is not acting in an investment advisor capacity and is not a registered investment advisor. The author recommends investors consult a qualified investment advisor before making any trade. This article is not an investment research report, but an opinion written at a point in time. The author's opinions expressed herein address only a small cross-section of data related to an investment in securities mentioned. Any analysis presented is based on incomplete information, and is limited in scope and accuracy. The information and data in this article are obtained from sources believed to be reliable, but their accuracy and completeness are not guaranteed. Any and all opinions, estimates, and conclusions are based on the author's best judgment at the time of publication, and are subject to change without notice. Past performance is no guarantee of future returns.

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Comments (29)

Good job on this one. I bought AAWW after reading your article and then doing some research. They have great earnings and I'm up a lot for such a short period of time. Appreciate your guidance!
Paul Franke profile picture
@aries1973 Glad to help.
NYCASH profile picture
Great article. I am long AAWW and I am looking forward to additional gains as you outlined in your article. My thought process was equal to yours with the continuing gains in e-commerce along with the reopening post pandemic.
Thank you Paul! I rarely buy non dividend-paying stocks in my recently-retired life but find $AAWW too compelling! Appreciate your insight and analysis.
Interesting insights on Amazon & AAWW - see www.fool.com/...
Hi Paul,

Thanks for the article. any thoughts on the insider sales over the last six month of ~ 14 Million.
For another unbelievable Price/FCF stock- have a look at NXST.
Paul Franke profile picture
@Nathan5 NXST = Considerable leverage against intangible assets, -$6 billion (-$150 per share) in hard asset book value, about 10-12 years of trailing annual cash flow to pay off all long-term liabilities.

Atlas has net assets worth more than current stock price in a fire sale. About 8 years of cash flow (trailing 2020 rate) to pay off all liabilities.
@Paul Franke As you point out, Atlas is a play on lockdown behavior continuing going forward; NXST with it's add revenue, is a play on the economy opening up. They have delevered over a full turn since the Tribune aquisiton a year and a half ago, and are currently at 3.6x. They are increasing divi by about 25%/year with a payout ratio of something like 18%; buying back shares; buying smaller companies to increase their digital offerings. Current Price/ FCF is below 5x.
Very informative. I'm buying, have always done well with your opinions. Why don't you have a newsletter?
Your reasons for not buying AAWW fit the market in general. I wonder however about the tangible asset valuation since the planes may be carried on the books at a higher cost than one could buy planes for now with the glut. An interesting stock pick and perhaps I will put in a limit order at $58.
Paul Franke profile picture
@PreCambrian I do think many passenger jets will be purchased on the cheap and converted to freight movers to meet demand this year.
I have read an article from November 2020 about Atlas Air refusing to repay 460M emergency coronavirus aid. Is there still a risk that they have to repay this money? Is a lot of money when you compare to 360M net income in 2020. Would Atlas Air have had a negative result for 2020 without this aid?
Paul Franke profile picture
@ericdenblanken I believe this sum was listed as "Other Operating Activities" on the cash flow statement, plus a reduction in "Accounts Payable."

Earnings before "Unusual Items" in 2020 was a record, and 2x the 2019 number (before taxes).

SA has "Normalized EPS" of $8.30, for a P/E closer to 7.5x.
Thanks for the nice article. Any idea what a new contract for the pilots might mean for their margins? I believe it is coming soon; not sure how much of an expense pilot pay is for them.
I always enjoy Paul's article though could never understand "the bottom fishing" in their titles. I would if the articles was published in October of 2019 when the stock was $20 before COVID or $30 when it has bottomed out.
Paul Franke profile picture
@LeonK2007 I blame FED Chairman Powell. It is hard to find any stock that has declined the last six months. If Atlas rises to $90 in December from $60 today, $60 will be considered a bottom.
Paul Franke profile picture
If I were running Atlas, I would use the extra $500 million in cash to start a 20% stock buyback. If they can purchase shares under the $79 in tangible book value, they can jump hard asset backing, EPS and cash flow per share dramatically by the end of the year.

Then, with another $300-400 million coming in the door during 2021, I would pay off some debt. Better final margins and fewer liabilities on top of a 15-20% bump in per share cash generation should translate into higher/safer Wall Street multiple valuations. A price of $90-100 is possible if the airfreight market remains tight in 12-18 months.
Alessandro Pasetti profile picture
Shrinking the share count makes sense, but a) they cannot deploy CA/PSPA-related funds to repurchase stock and then b) buybacks/dividends are forebidden until end of Q3, where there remain restrictions on executive compensation until 3/24/2022. Specifically (source: 10-K):

"In connection with agreements entered into with the U.S. Treasury (the “PSP Agreement”), with respect to payroll support funding (the “Payroll Support Program”) available to cargo air carriers under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), we are required to comply with the relevant requirements of the CARES Act. These requirements include that funds provided pursuant to the PSP Agreement be used exclusively for the payment of certain employee wages, salaries and benefits of Atlas and Southern Air (the “PSP Recipients”). The Payroll Support Program subjects the PSP Recipients and certain of their affiliates to a number of restrictions, including prohibitions of repurchasing shares in the open market of, or making dividend payments with respect to, our common stock through September 30, 2021, as well as certain limitations on executive compensation until March 24, 2022. Under the PSP Agreement, we must also maintain certain internal controls and records relating to the payroll support funding and we are subject to additional reporting obligations. If we do not comply with the requirements and restrictions within the Payroll Support Program, the U.S. Treasury could require repayment of amounts previously provided to us, among other actions, which could have a material adverse effect on our business, results of operations and financial condition."

Interesting piece, thanks.
Paul Franke profile picture
@Alessandro Pasetti Thanks for the comment.
Paul Franke profile picture
@Alessandro Pasetti By the time share buybacks are allowed in October, the price could be north of $80.
Pacific Orient profile picture
I bought in at 19 and change. I actually think there is considerable down side risk currently as time sensitive ppe related shipments taper off, seaborne traffic has obviously picked up and as international commercial air traffic picks up there will be a surge in belly cargo space, gouging market share.
Paul Franke profile picture
@Pacific Orient Thanks for the comment.

Yes, the growing number of commercial air flights will help the situation some. However, the shear volume of packages will continue to expand faster, at least into the summer months. Consumers are full of cash and confidence at the moment, stock and real estate wealth readings are at record highs. If airfreight capacity increases 10%, but package volume grows 30%, the shortage of delivery options gets "worse" in coming months.
How do you explain 20 insider sales transactions and no insider buys over the last five months, with the latest sale on March 29, 2021, and three insider sales in March by the CFO? Agreed, very cheap valuation, but are you missing something here? What will happen to freight rates as the airlines start flying again and carrying cargo in their belly? Has Amazon applied for their air operating certificate? They are building out their ground transport infrastructure and I'm sure would like to do the same in the sky. Could you address these issues. Thank you
Paul Franke profile picture
@lakeman Amazon should acquire Atlas to build out their airfreight exposure quickly.

Insiders often sell after a 200% price advance over less than a year. Cannot blame them for locking in big gains. They are likely assuming the world will get back to normal and airfreight traffic will do the same this year.

However, my understanding is the airfreight capacity problem has gotten worse over the last month, because package volumes are growing much faster than anyone anticipated 8-10 weeks ago.
Paul Franke profile picture
@lakeman Yahoo! Finance has a net 60,000 shares purchased by insiders, after you include stock grants the last 6 months.

killoranf profile picture
@Paul Franke Thanks for the information. I’m most concerned about air freight capacity increasing significantly during the remainder of the year, as the major airlines resume higher levels of passenger service. Any sense for how secure AAWW’s freight contracts are in the face of this aspect of the great re-start?
JCarl Finance profile picture
$AAWW is incredibly undervalued. I'm glad I saw this when I did even though I didn't buy close to the bottom a year ago. Very comfortable buying at $60 with my price target ranging from $80-$100 for EOY.
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