Should You Buy Altra Industrial Motion Corp (AIMC)?

Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is Altra Industrial Motion Corp (NASDAQ:AIMC), so let’s take a closer look at the sentiment that surrounds it in the current quarter.

Hedge fund interest in Altra Industrial Motion Corp (NASDAQ:AIMC) shares was flat at the end of last quarter and despite a 15% drop registered by the stock between July and September, looks like investors decided to stick to their holdings. At the end of this article we will also compare AIMC to other stocks, including CTS Corporation (NYSE:CTS) and Bojangles Inc (NASDAQ:BOJA) to get a better sense of its popularity.

If you’d ask most stock holders, hedge funds are viewed as slow, outdated financial tools of years past. While there are greater than 8000 funds in operation today, Our experts choose to focus on the masters of this club, about 700 funds. These money managers orchestrate most of the hedge fund industry’s total asset base, and by watching their first-class stock picks, Insider Monkey has unsheathed a number of investment strategies that have historically outstripped Mr. Market. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Keeping this in mind, we’re going to take a gander at the new action encompassing Altra Industrial Motion Corp (NASDAQ:AIMC).

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

At the Q3’s end, a total of 7 of the hedge funds tracked by Insider Monkey held long positions in this stock, unchanged over the quarter. According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Spitfire Capital, managed by Julian Allen, holds the number one position in Altra Industrial Motion Corp (NASDAQ:AIMC), valued at $9.4 million, comprising 4% of its 13F portfolio. On Spitfire Capital’s heels is Lee Munder Capital Group, managed by Lee Munder, which holds a $9 million position; 0.2% of its 13F portfolio is allocated to the company. The remaining peers that are bullish comprise Paul Hondros’s AlphaOne Capital Partners, Joel Greenblatt’s Gotham Asset Management, and D. E. Shaw’s D E Shaw.

Judging by the fact that Altra Industrial Motion Corp (NASDAQ:AIMC) has faced bearish sentiment from hedge fund managers, it’s easy to see that there was a specific group of hedgies that slashed their entire stakes by the end of the third quarter. Interestingly, John Overdeck and David Siegel’s Two Sigma Advisors said goodbye to the largest investment of the “upper crust” of funds followed by Insider Monkey, valued at about $1.2 million in stock, and Peter Muller’s PDT Partners was right behind this move, as the fund sold off about $0.3 million worth. These transactions are important to note, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s check out hedge fund activity in other stocks similar to Altra Industrial Motion Corp (NASDAQ:AIMC). We will take a look at CTS Corporation (NYSE:CTS), Bojangles Inc (NASDAQ:BOJA) and Strayer Education Inc (NASDAQ:STRA). This group of stocks’ market caps are similar to AIMC’s market cap.

As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $71 million. That figure was $20 million in AIMC’s case. Strayer Education Inc (NASDAQ:STRA) is the most popular stock in this table, while CTS Corporation (NYSE:CTS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Altra Industrial Motion Corp (NASDAQ:AIMC) is even less popular than CTS. Considering that hedge funds aren’t fond of this stock in relation to other companies analyzed in this article, it may be a good idea to analyze it in detail and understand why the smart money isn’t behind this stock. This isn’t necessarily bad news. Although it is possible that hedge funds may think the stock is overpriced and view the stock as a short candidate, they may not be very familiar with the bullish thesis. In either case more research is warranted.