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Were Hedge Funds Right About Buying Allied Motion Technologies, Inc. (AMOT)?

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Allied Motion Technologies, Inc. (NASDAQ:AMOT) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is Allied Motion Technologies, Inc. (NASDAQ:AMOT) worth your attention right now? Money managers were in a bullish mood. The number of long hedge fund positions rose by 2 recently. Our calculations also showed that AMOT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 percentage points since March 2017 (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 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Mario Gabelli of GAMCO Investors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, we take a look at lists like the 10 most profitable companies in the world to identify emerging companies that are likely to deliver 1000% gains in the coming years. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Now we’re going to take a peek at the latest hedge fund action regarding Allied Motion Technologies, Inc. (NASDAQ:AMOT).

How have hedgies been trading Allied Motion Technologies, Inc. (NASDAQ:AMOT)?

At Q1’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 18% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMOT over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

Among these funds, ACK Asset Management held the most valuable stake in Allied Motion Technologies, Inc. (NASDAQ:AMOT), which was worth $13.1 million at the end of the third quarter. On the second spot was Juniper Investment Company which amassed $9.1 million worth of shares. Renaissance Technologies, Citadel Investment Group, and GAMCO Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Juniper Investment Company allocated the biggest weight to Allied Motion Technologies, Inc. (NASDAQ:AMOT), around 14.12% of its 13F portfolio. ACK Asset Management is also relatively very bullish on the stock, setting aside 6.53 percent of its 13F equity portfolio to AMOT.

As aggregate interest increased, key money managers were leading the bulls’ herd. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Allied Motion Technologies, Inc. (NASDAQ:AMOT). Arrowstreet Capital had $0.9 million invested in the company at the end of the quarter. Greg Eisner’s Engineers Gate Manager also made a $0.2 million investment in the stock during the quarter. The only other fund with a brand new AMOT position is Paul Marshall and Ian Wace’s Marshall Wace LLP.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Allied Motion Technologies, Inc. (NASDAQ:AMOT) but similarly valued. These stocks are Legacy Housing Corporation (NASDAQ:LEGH), China Distance Education Hldgs Ltd (NYSE:DL), Haverty Furniture Companies, Inc. (NYSE:HVT), and Global Water Resources, Inc. (NASDAQ:GWRS). All of these stocks’ market caps resemble AMOT’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
LEGH 4 5281 0
DL 2 3460 -1
HVT 10 33803 0
GWRS 3 4299 -1
Average 4.75 11711 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 4.75 hedge funds with bullish positions and the average amount invested in these stocks was $12 million. That figure was $36 million in AMOT’s case. Haverty Furniture Companies, Inc. (NYSE:HVT) is the most popular stock in this table. On the other hand China Distance Education Hldgs Ltd (NYSE:DL) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Allied Motion Technologies, Inc. (NASDAQ:AMOT) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks returned 13.3% in 2020 through June 25th but still managed to beat the market by 16.8 percentage points. Hedge funds were also right about betting on AMOT as the stock returned 42.7% so far in Q2 (through June 25th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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