NEW YORK, Oct 21 (Reuters) - Activist investor Engaged

Capital has built a sizable stake in Cognex ( CGNX ) and is

urging the maker of machine vision systems to cut costs and use

cost consultants, arguing this could help the stock price nearly

double in the next two years.

"This is an AI company without the AI valuation," Engaged's

founder and chief investment officer Glenn Welling said on

Tuesday at the 13D Monitor Active-Passive Investment Summit in

New York.

Welling did not disclose the size of Engaged's stake in

Cognex ( CGNX ) but called it one of the hedge fund's biggest positions.

A recent regulatory filing showed that Engaged had roughly $700

million in assets.

Cognex's ( CGNX ) smart cameras and bar code readers are used by

customers including retailer Amazon ( AMZN ) and car maker BMW

for purposes such as spotting defects in packaging or

scratches in doors.

The company, which has a market valuation of $7.7 billion,

has seen its stock price tumble some 50% from its all-time high

four years ago.

Now with new management at the helm - CEO Matt Moschner was

appointed earlier this year and CFO Dennis Fehr was named to the

position in 2024 - Welling said he is confident significant

improvements can be made to drive revenue, profit and ultimately

the share price higher. Cognex's ( CGNX ) share price traded at $47.64 at

the start of the week.

Last year, the company reported margins of 17% but Welling

said those could be closer to 40% with changes to the company's

overall spending, particularly on its research and development

side where it could cut back on projects with low returns.

Cognex's ( CGNX ) main competitor, Japanese company Keyence ( KYCCF ), boasts

margins of 53%.

The company has also reengineered some products and with the

help of artificial intelligence they are easier to install and

operate, opening up a new potential field of customers, he said.

Welling said Engaged has had constructive discussions with

Cognex ( CGNX ) and introduced the management to cost-cutting consultants

who have been involved with other Engaged target companies.