Hedge Fund Buys 622,500 Knowles Shares as Stock Outperforms S&P 500 — Should You?

On November 14, New York-based Harvey Partners disclosed a new position in Knowles Corporation (NYSE:KN), adding 622,500 shares valued at approximately $14.5 million during the third quarter.

What Happened

According to a filing with the Securities and Exchange Commission dated November 14, Harvey Partners established a new position in Knowles Corporation (NYSE:KN). The firm reported a holding of 622,500 shares, amounting to a market value of approximately $14.5 million as of September 30. The position accounts for 1.3% of the fund’s reportable U.S. equity assets.

What Else to Know

Top holdings after the filing:

• NYSE: NPO: $56.3 million (5.1% of AUM)
• NYSE: BWXT: $53.4 million (4.9% of AUM)
• NYSE: AZZ: $53 million (4.8% of AUM)
• NASDAQ: GLDD: $44.4 million (4% of AUM)
• NASDAQ: ADEA: $43.9 million (4% of AUM)

As of Friday, shares of Knowles Corporation were priced at $23.37, up 20% over the past year and well outperforming the S&P 500, which is up 13% in the same period.

Company Overview

Company Snapshot

• Knowles Corporation offers micro-acoustic microphones, balanced armature speakers, audio processors, high-performance capacitors, and RF solutions across consumer electronics, medtech, defense, electric vehicle, industrial, and communications sectors.
• The company generates revenue by designing, manufacturing, and selling audio and precision device components to original equipment manufacturers, contract manufacturers, and distributors worldwide.
• Primary customers include global OEMs in mobile, hearing health, IoT, computing, medical, satellite communications, and industrial markets.

Knowles Corporation is a leading provider of advanced micro-acoustic, audio, and precision device solutions with a global footprint and a diversified customer base. The company leverages decades of expertise to serve high-growth markets such as mobile communications, hearing health, and industrial electronics.

Foolish Take

A new position in a volatile name like Knowles matters because it signals where managers see durable demand. In other words, Harvey Partners’ move might suggest confidence that Knowles’ exposure to diversified end-markets—from hearing health to defense and industrial electronics—can support steadier earnings even when consumer hardware cycles soften.

In the third quarter, Harvey Partners initiated a $14.5 million position, making Knowles a modest but intentional addition at 1.3% of reportable assets. And although shares have traded choppily in recent years, Knowles has outperformed the broader market over the past 12 months, rising 20% versus the S&P 500’s 13% gain.

Recent earnings help explain the interest. Third-quarter revenue grew 7% year over year to $152.9 million, while gross margin expanded to 45.7%, and non-GAAP EPS came in at $0.33—above the midpoint of guidance. Management highlighted strong design activity, a healthy backlog, and reiterated expectations for 6% organic revenue growth this year, with fourth-quarter revenue projected to rise another 9% year over year. The company also generated $29 million in operating cash and repurchased $20 million of stock, underscoring improving fundamentals that long-term investors may view as a stabilizing force despite ongoing share volatility.

Glossary

13F reportable assets: Assets that institutional investment managers must disclose quarterly to the SEC, showing their U.S. equity holdings.
Assets under management (AUM): The total market value of investments managed on behalf of clients by a fund or firm.
Alpha: A measure of an investment's performance relative to a benchmark, showing value added or subtracted by active management.
Original equipment manufacturer (OEM): A company that produces parts or equipment used in another company's end products.
Micro-acoustic: Technology involving very small audio components, such as miniature microphones and speakers, for electronic devices.
Balanced armature speakers: Small, precise speakers commonly used in hearing aids and in-ear monitors for accurate sound reproduction.
RF solutions: Products or technologies related to radio frequency, used for wireless communication in electronic devices.
Contract manufacturer: A company hired to produce goods on behalf of another company, often at scale and to specific requirements.
TTM: The 12-month period ending with the most recent quarterly report.

Jonathan Ponciano has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Azz and BWX Technologies. The Motley Fool has a disclosure policy.