Is Spruce Point Capital about to come in the way of Ametek Inc (NYSE:AME)?


Although the firm’s manager, Ben Axler didn’t spill the beans yesterday, we have 2 reasons that make us come to the conclusion that something big is about to happen which sadly will be disadvantageous for Ametek Inc (NYSE:AME). Spruce Point Capital Management, LLC is a New York based investment manager founded back in 2009. The company’s prime focuses are on short selling, value and special situation investment opportunities.

Another aspect of the firm is that it specializes in in-depth fundamental research and takes an activist approach to investing. As of today, its featured research list includes iRobot Corp (IRBT), LKQ Corp (LKQ) and topping the list is AME. In an interview yesterday, the firm’s manager announced the unveiling of a short campaign against a company currently holding the largest stocks in America that also has a high index component.

He assured that he is going to announce the name of that company today (Friday, 14th Nov). Now the question is that why are we so sure that the targeted company is AME? AME, founded in 1930, based in the Pennsylvania State of United States, has not only given around 15,000 people employment worldwide and has an EIM division being more than EMG, but the company also had sales of $3.6 billion as of last year.

The company specializes in manufacturing electronic instruments and motors for a number of industries. The company’s original name, American Machine and Metals, was changed to Ametek Inc (NYSE:AME) in the early 1960s because of a change in structure. Initially, AME used to provide heavy machinery but now it is a manufacturer of analytical instruments, precision components and specialty materials.

Moreover, its Corporate Growth Plan is based on four designs: operational excellence, strategic acquisitions and alliance, global & market expansion, and new products. From the look of this progress, it can be assured that the company seems profitable and in terms of capitalization and has apparently a lot of cash. When observing the company’s profile through last years’ annual report, there weren’t any major outcomes that would lead to curiosity amongst any one of us.

The least that can happen is that some activist investor might start pushing for more dividends, which can be seen from Axler’s tweets from yesterday. He tweeted that the company, which he is planning to break was not fully investigated by the market because everything looks fine at face value. From what he explained, albeit vaguely, on Twitter, it makes us realize that it can’t possibly be anything else.

According to Axler, AME has been growing pretty fast in the past 10 years, starting from around $10 in 2005 and increasing tremendously to $50 as of today, with an exception of certain misses in earnings in-between. Now, what is surprising is that AME’s growth fell by 3.7%, in after hours trading yesterday for no reason at all. Our fingers are crossed as to what will happen next.