Is AMETEK, Inc. (AME) A Good Stock To Buy?

Reymerlyn Martin

Sun, Mar 31, 2019, 6:10 PM

Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.

AMETEK, Inc. (NYSE:AME) was in 32 hedge funds' portfolios at the end of the fourth quarter of 2018. AME has seen a decrease in hedge fund interest recently. There were 33 hedge funds in our database with AME positions at the end of the previous quarter. Our calculations also showed that AME isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (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 27.5% through March 12, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

We're going to take a peek at the latest hedge fund action regarding AMETEK, Inc. (NYSE:AME).

What does the smart money think about AMETEK, Inc. (NYSE:AME)?

Heading into the first quarter of 2019, a total of 32 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in AME over the last 14 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in AMETEK, Inc. (NYSE:AME) was held by Citadel Investment Group, which reported holding $248.4 million worth of stock at the end of September. It was followed by GAMCO Investors with a $101.2 million position. Other investors bullish on the company included Select Equity Group, Millennium Management, and Point72 Asset Management.

Due to the fact that AMETEK, Inc. (NYSE:AME) has witnessed falling interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few hedgies who sold off their full holdings heading into Q3. At the top of the heap, Mark Moore's ThornTree Capital Partners cut the largest investment of all the hedgies followed by Insider Monkey, worth about $45.9 million in stock. Clint Carlson's fund, Carlson Capital, also said goodbye to its stock, about $32.8 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 1 funds heading into Q3.

Let's also examine hedge fund activity in other stocks similar to AMETEK, Inc. (NYSE:AME). These stocks are Ball Corporation (NYSE:BLL), Liberty Global Plc (NASDAQ:LBTYK), Splunk Inc (NASDAQ:SPLK), and Avangrid, Inc. (NYSE:AGR). All of these stocks' market caps resemble AME's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BLL,33,628419,13 LBTYK,32,2957690,-9 SPLK,25,466083,-14 AGR,13,347814,-5 Average,25.75,1100002,-3.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.75 hedge funds with bullish positions and the average amount invested in these stocks was $1100 million. That figure was $886 million in AME's case. Ball Corporation (NYSE:BLL) is the most popular stock in this table. On the other hand Avangrid, Inc. (NYSE:AGR) is the least popular one with only 13 bullish hedge fund positions. AMETEK, Inc. (NYSE:AME) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on AME as the stock returned 19.6% and outperformed the market as well.

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

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