Yesterday, Ben Axler of Spruce Point Capital announced that he would be unveiling his latest short campaign against “one of the largest stocks in America and a major index component,” to be named later today and that the short thesis is partly based on…….. (Even though the info is public, we are redacting the major piece of evidence that led to this theory, since we do not want to reveal our methodology). We’ll have to wait on the full story to come out today, but even with just these two details it looks like Axler is shorting Ametek Inc (NYSE:AME).
Why we think Ametek is the target
Redacted sentence. We’ve already seen the short thesis on ….., and besides from the (admittedly vague) description that Axler gave on Twitter, Ametek fits like a glove.
With a $12.8 billion market cap it is a major US stock, former CFO John Molinelli retired in July 2012 (Axler mentions a ‘convenient’ CFO retirement) and the proxy materials immediately prior specifically have clawback language changed to illegal conduct. Ametek Inc (NYSE:AME) has had an impressive run in the last ten years, rising from just about $10 at the beginning of 2005 to more than $50 today, with few earning misses, as Axler noted.
Vanguard’s move into PE may change the landscape forever
Private equity has been growing in popularity in recent years as more and more big-name funds and institutional investors dive in. Now even indexing giant Vanguard is out to take a piece of the PE pie. During a panel at the Morningstar Investment Conference this year, Fran Kinniry of Vanguard, John Rekenthaler of Morningstar and Read More
And we’re not the only ones to reach this conclusion either: Ametek Inc (NYSE:AME) fell 3.7% in after-hours trading yesterday for no other apparent reason.
Ametek looks healthy
Ametek Inc (NYSE:AME) manufactures electronic instruments and motors for a range of industries, with more than 15,000 employees worldwide and $3.6 billion in sales last year, with the EIM division earning a little bit more than EMG. By any measure the company is profitable, well capitalized, and has plenty of cash on hand. Looking through last year’s annual report, there weren’t any flagrant red flags that would make you want to dig deeper (although see below for some other info we obtained). If anything, you might expect some activist investor to start pushing for more dividends. But that’s also in line with Axler’s tweets from yesterday. He says that the company he is shorting has gone uninvestigated by the market precisely because everything looks good on the surface.
Some other quick points:
Gordon stopped resigned and stop serving as audit chair in 2011
Many foreign subsidies.
$850 million in undistributed ex-US earnings.
Directors and officers are selling lots of shares.
Short interest ticked up 66% recently
Check back for Axler’s presentation as soon as we get a hold of it, with full analysis to follow later today.