Should You Avoid Allied Motion Technologies, Inc. (AMOT)?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards Allied Motion Technologies, Inc. (NASDAQ:AMOT), and what that likely means for the prospects of the company and its stock.

Allied Motion Technologies, Inc. (NASDAQ:AMOT) investors should pay attention to a decrease in hedge fund interest recently. At the end of this article we will also compare AMOT to other stocks, including Enphase Energy Inc (NASDAQ:ENPH), Bill Barrett Corporation (NYSE:BBG), and Care.com Inc (NYSE:CRCM) to get a better sense of its popularity.

According to most stock holders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are over 8000 funds with their doors open at the moment, Our researchers hone in on the upper echelon of this club, around 700 funds. These investment experts manage the lion’s share of the smart money’s total asset base, and by shadowing their first-class equity investments, Insider Monkey has spotted a number of investment strategies that have historically defeated Mr. Market. Insider Monkey’s small-cap hedge fund strategy beat the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, we’re going to check out the latest action regarding Allied Motion Technologies, Inc. (NASDAQ:AMOT).

Hedge fund activity in Allied Motion Technologies, Inc. (NASDAQ:AMOT)

Heading into Q4, a total of 7 of the hedge funds tracked by Insider Monkey were long this stock, a change of -13% from one quarter earlier. With the smart money’s capital changing hands, there exists a select group of key hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Renaissance Technologies, managed by Jim Simons, holds the most valuable position in Allied Motion Technologies, Inc. (NASDAQ:AMOT). Renaissance Technologies has an $2.4 million position in the stock, comprising less than 0.1%% of its 13F portfolio. On Renaissance Technologies’s heels is AQR Capital Management, led by Cliff Asness, holding an $1.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism encompass Peter Muller’s PDT Partners, Israel Englander’s Millennium Management and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

We view hedge fund activity in the stock unfavorable, but in this case there was only a single hedge fund selling its entire position: Tudor Investment Corp. One hedge fund selling its entire position doesn’t always imply a bearish intent. Theoretically a hedge fund may decide to sell a promising position in order to invest the proceeds in a more promising idea. However, we don’t think this is the case in this case because none of the 700+ hedge funds tracked by Insider Monkey identified AMOT as a viable investment and initiated a position in the stock.

Let’s now review hedge fund activity in other stocks similar to Allied Motion Technologies, Inc. (NASDAQ:AMOT). We will take a look at Enphase Energy Inc (NASDAQ:ENPH), Bill Barrett Corporation (NYSE:BBG), Care.com Inc (NYSE:CRCM), and Cumulus Media Inc (NASDAQ:CMLS). All of these stocks’ market caps match AMOT’s market cap.

As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $26 million. That figure was just $5 million in AMOT’s case. Cumulus Media Inc (NASDAQ:CMLS) is the most popular stock in this table. On the other hand, Care.com Inc (NYSE:CRCM) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Allied Motion Technologies, Inc. (NASDAQ:AMOT) is even less popular than CRCM. 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.