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Is AMETEK, Inc. (AME) Going to Burn These Hedge Funds?

Nina Todic

Billionaire hedge fund managers such as 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.

Is AMETEK, Inc. (NYSE:AME) the right pick for your portfolio? The best stock pickers are in a bearish mood. The number of bullish hedge fund positions decreased by 4 recently. Our calculations also showed that ame isn't among the 30 most popular stocks among hedge funds.

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 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 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

CITADEL INVESTMENT GROUP

Let's analyze the new hedge fund action surrounding AMETEK, Inc. (NYSE:AME).

What have hedge funds been doing with AMETEK, Inc. (NYSE:AME)?

Heading into the fourth quarter of 2018, a total of 33 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -11% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AME over the last 13 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with AME Positions

The largest stake in AMETEK, Inc. (NYSE:AME) was held by Citadel Investment Group, which reported holding $257.8 million worth of stock at the end of September. It was followed by Select Equity Group with a $138.9 million position. Other investors bullish on the company included GAMCO Investors, Millennium Management, and D E Shaw.

Since AMETEK, Inc. (NYSE:AME) has experienced declining sentiment from the entirety of the hedge funds we track, logic holds that there exists a select few hedgies who sold off their entire stakes heading into Q3. At the top of the heap, Greg Poole's Echo Street Capital Management dropped the largest position of all the hedgies tracked by Insider Monkey, totaling about $6.9 million in stock, and Andrew Feldstein and Stephen Siderow's Blue Mountain Capital was right behind this move, as the fund said goodbye to about $3.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 4 funds heading into Q3.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as AMETEK, Inc. (NYSE:AME) but similarly valued. We will take a look at Apache Corporation (NYSE:APA), Plains All American Pipeline, L.P. (NYSE:PAA), FirstEnergy Corp. (NYSE:FE), and IAC/InterActiveCorp (NASDAQ:IAC). All of these stocks' market caps are closest to AME's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position APA,26,882116,9 PAA,10,49421,0 FE,38,3701409,10 IAC,51,3125902,0 Average,31.25,1939712,4.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 31.25 hedge funds with bullish positions and the average amount invested in these stocks was $1.94 billion. That figure was $1.19 billion in AME's case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 10 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. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. In this regard IAC might be a better candidate to consider a long position.

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

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