Is Altra Industrial Motion Corp. (AIMC) Going to Burn These Hedge Funds?

“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. That’s why we believe it would be worthwhile to take a look at the hedge fund sentiment on Altra Industrial Motion Corp. (NASDAQ:AIMC) in order to identify whether reputable and successful top money managers continue to believe in its potential.

Altra Industrial Motion Corp. (NASDAQ:AIMC) was in 22 hedge funds’ portfolios at the end of the first quarter of 2019. AIMC investors should pay attention to an increase in support from the world’s most elite money managers lately. There were 21 hedge funds in our database with AIMC holdings at the end of the previous quarter. Our calculations also showed that AIMC isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 2019 (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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Jeffrey Gates Gates Capital

Let’s check out the new hedge fund action regarding Altra Industrial Motion Corp. (NASDAQ:AIMC).

What have hedge funds been doing with Altra Industrial Motion Corp. (NASDAQ:AIMC)?

Heading into the second quarter of 2019, a total of 22 of the hedge funds tracked by Insider Monkey were long this stock, a change of 5% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AIMC over the last 15 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.


More specifically, Gates Capital Management was the largest shareholder of Altra Industrial Motion Corp. (NASDAQ:AIMC), with a stake worth $144.7 million reported as of the end of March. Trailing Gates Capital Management was Citadel Investment Group, which amassed a stake valued at $59.6 million. Balyasny Asset Management, Pentwater Capital Management, and D E Shaw were also very fond of the stock, giving the stock large weights in their portfolios.

Now, specific money managers have been driving this bullishness. Laurion Capital Management, managed by Benjamin A. Smith, created the largest position in Altra Industrial Motion Corp. (NASDAQ:AIMC). Laurion Capital Management had $2.5 million invested in the company at the end of the quarter. Brandon Haley’s Holocene Advisors also initiated a $0.4 million position during the quarter. The following funds were also among the new AIMC investors: Noam Gottesman’s GLG Partners, Michael Platt and William Reeves’s BlueCrest Capital Mgmt., and Ken Griffin’s Citadel Investment Group.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Altra Industrial Motion Corp. (NASDAQ:AIMC) but similarly valued. We will take a look at Veoneer, Inc. (NYSE:VNE), Luxoft Holding Inc (NYSE:LXFT), Cohen & Steers, Inc. (NYSE:CNS), and Newmark Group, Inc. (NASDAQ:NMRK). This group of stocks’ market caps are closest to AIMC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VNE 8 160838 -2
LXFT 23 389871 9
CNS 9 62135 1
NMRK 24 119754 3
Average 16 183150 2.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $183 million. That figure was $309 million in AIMC’s case. Newmark Group, Inc. (NASDAQ:NMRK) is the most popular stock in this table. On the other hand Veoneer, Inc. (NYSE:VNE) is the least popular one with only 8 bullish hedge fund positions. Altra Industrial Motion Corp. (NASDAQ:AIMC) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on AIMC as the stock returned 4% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

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