Stocks: Something You Don't See Often- ATMU Stock

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For anyone interested in the stock market, I want to draw your attention to something happening right now that doesn't happen very often. In fact, I've been trying to think of a comparable situation for the past several days (along with a few of my friends) and we have not come up with a single example quite like what I am about to discuss. Bear with me while a get a few formalities out of the way...

I'm referring specifically to Atmus Filtration (Ticker: ATMU), which just finished an exchange offer this past Tuesday with Cummins (Ticker: CMI), the maker of industrial engines for trucks, buses, railroads, etc. You don't need to know about Cummins except for me to say that the offer (now expired) was for you to buy CMI stock and have it exchanged for ATMU stock at a roughly 7-1/2% discount. So someone would buy shares of CMI and have them exchanged for over 12 times as many shares of ATMU (a much cheaper stock, but it was still a good deal).

I've done corporate actions like this since first doing Home Depot in 2007. What got me thinking about this one was when I had a few people ask about just keeping the shares of ATMU stock longer term instead of selling it as soon as you got your shares. The "sell immediately" option is probably what the vast majority of people did.

As I dug deeper into this one here is what I found that got me quite interested in making money on ATMU over a longer timeframe. In the stock market, you have two different types of investors who are drawn to opposite types of stocks. Think about short-term momentum type traders. They might be day traders and tend to be attracted to stocks (often tech stocks) which are at or near one year highs. They tend to look at volume (the number of shares traded) as an important indicator. Think of volume as another word for conviction. If a stock hits a new high, but volume is only half what it normally is, that move is suspect. Hitting new highs with at least 50% more than normal volume is much better.

On the other hand, you have so-called value investors. Warren Buffett is perhaps the most famous value investor of all-time. They tend to gravitate to profitable stocks with low P/E (price to earnings) ratios. Generally, the lower the better with P/E's. A P/E of over 100 is extremely high although occasionally, I'll see P/E's of over 1,000. A normal P/E is probably 15-35. ATMU, even after a sharp move up in the past several weeks, still has a P/E of just 14. WOW!!!

Let me cut to the chase. ATMU stock right now appeals to BOTH the momentum crowd AND value investors, which doesn't happen very often. Here is another great thing. This stock is just now being discovered. How do I know that? At the risk of sounding like I'm bragging, I follow the markets very closely and have memorized over 500 ticker symbols. Before first buying CMI stock because of the above reference exchange offer, I'd never heard of ATMU. Neither have any of my friends as best as I can tell.

So, I think it is safe to say that just one month ago almost nobody had heard of this stock. And the exchange offer introduced it to many, who probably told friends and others about it. The number of shares traded per day picked up sharply starting on March 7th and hasn't looked back since. What is extremely impressive is that the deal was officially over this past Tuesday, but volume is STILL very high. That tells me that institutional buyers are accumulating this stock right now.

So, let's summarize, you have a cheap stock that is currently under accumulation by institutions. In fact, none other than well-respected Investors Business Daily (IBD) has a composite rating of "A" for this stock, their highest rating. The momentum crowd (including a close personal friend of mine from Florida who just bought the stock Friday for the very first time) loves this stock and that includes technical trader types who could generally care less about news and are only concerned with a good looking stock chart.

Atmus closed Friday at $29.50 a share after hitting yet another all-time high earlier in the day. I'll be quite surprised if this isn't easily in the 40's by the end of the year, if not possibly much higher. All that said, I'm not really a buy and hold type. I'm more of a short-term day trader type. Since March 8th, right as the volume was surging, I've traded it 14 times and made money each and every time, totaling over $2,000 in profits. This was in addition to the exchange offer itself where I made over $5k in profits. Again, not trying to brag. Those are simply facts.

This has been a VERY EASY stock to trade for the past several weeks. Do your own due diligence before doing anything on this stock. It is still possible to lose money on this or any stock.

So, for anyone who missed out on the exchange offer, it appears that all is not lost.

Let me add another thing. Any stock could potentially go down 10-20% quickly. That said, please don't go in with all the gusto you can muster on the first trade. Save something in your back pocket so you can afford to double down if it becomes cheaper right after you buy it. Do you think Warren Buffett would say "Oops" if a new purchase declined sharply right away. Doubtful, he'd likely figure it was on sale (unless something was truly wrong and perhaps bankruptcy was on the horizon) and buy more at a cheaper price. One of my trades for ATMU involved buying it 3 times before it bounced and I could get out with a nominal profit. So please be prepared for that.

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Update on ATMU. Since March 8th I’ve traded it 23 times without any losses. Total profits (above and beyond the CMI/ATMU tender offer) are now over $3,500. This one has truly been fun and just a little over a month ago I’d never even heard of the company!

This has without question been my most pleasant surprise of 2024 thus far. Please read (don’t just skim) this entire post before committing any capital to this stock!