Altra Holdings: Close to an Entry Point

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 |  About: Altra Holdings, Inc. (AIMC)
by: Brandon Fredrickson

Altra Holdings, Inc. (NASDAQ:AIMC) manufactures a wide variety of power transmission and motion control products such as clutches and breaks, enclosed gear drives, engineered belt drive, couplings, engineered bearing assemblies and a variety of related products. The products are used in various high volume manufacturing processes as well as in elevators as well as commercial and residential lawnmowers.

As I have explained before my process starts with technical analysis. In the case of AIMC this has been a strong stock, refusing to decline, even during the bear phase the market has gone through most of this year. One of the strongest buying patterns is a long, sideways type price "basing" move, which we see has been forming in Altra since early May. The stock has been on my radar for a few months, and I think that it's now getting close to an entry.

Altra reported very solid second quarter results that beat estimates for its revenue and EPS numbers. This occurred despite overall deterioration of Industrial conditions in its primary North American market. Altra has a history of positive EPS surprises, which is something I like to see in a company. They are also seeing solid International growth for the product line, and its overall 7.3% internal growth is better than its peers. The company has been improving margins, which hit records this quarter, and it continues to introduce new products in new markets. All of this, along with the technical picture I presented above has me bullish on AIMC if it can close above $18.25 per share on above average volume.

This is a relatively unknown stock, with only five analysts covering it and and an average daily volume of around 250k shares. With a share price of under $25, all of these factors could be contributing to the lack of coverage even though AIMC has a history of strong EPS and Revenue growth, along with very solid ROI and Cash Flows. This lack of coverage can create risks as well as benefits to an investor. If you're not used to small cap stocks of course you should go slowly with any relatively unknown name, but to me, these are the kind of names, much like Almost Family (NASDAQ:AFAM) (although AFAM had much better traits overall and I was more aggressive with that position than I will be with this one) which offer the potential of outsized returns.

Disclosure: I currently hold no position but I will buy AIMC on a close or substantial intraday break above 18.25.