Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved, lost a third of its value since the end of July. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 30 S&P 500 stocks among hedge funds at the end of September 2018 yielded an average return of 6.7% year-to-date, vs. a gain of 2.6% for the S&P 500 Index. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Ambac Financial Group, Inc. (NASDAQ:AMBC).
Ambac Financial Group, Inc. (NASDAQ:AMBC) was in 21 hedge funds’ portfolios at the end of the third quarter of 2018. AMBC has experienced an increase in activity from the world’s largest hedge funds of late. There were 19 hedge funds in our database with AMBC holdings at the end of the previous quarter. Our calculations also showed that ambc isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Let’s analyze the key hedge fund action encompassing Ambac Financial Group, Inc. (NASDAQ:AMBC).
Hedge fund activity in Ambac Financial Group, Inc. (NASDAQ:AMBC)
At the end of the third quarter, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of 11% from the second quarter of 2018. By comparison, 16 hedge funds held shares or bullish call options in AMBC heading into this year. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Ambac Financial Group, Inc. (NASDAQ:AMBC) was held by EJF Capital, which reported holding $36.2 million worth of stock at the end of September. It was followed by Rubric Capital Management with a $28.6 million position. Other investors bullish on the company included Tontine Asset Management, Sessa Capital, and GLG Partners.
As one would reasonably expect, key hedge funds were breaking ground themselves. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the largest position in Ambac Financial Group, Inc. (NASDAQ:AMBC). Arrowstreet Capital had $1.9 million invested in the company at the end of the quarter. Steven Tananbaum’s GoldenTree Asset Management also initiated a $0.4 million position during the quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ambac Financial Group, Inc. (NASDAQ:AMBC) but similarly valued. These stocks are Independence Realty Trust Inc (NYSE:IRT), CBTX, Inc. (NASDAQ:CBTX), Columbus McKinnon Corporation (NASDAQ:CMCO), and Revance Therapeutics Inc (NASDAQ:RVNC). This group of stocks’ market values resemble AMBC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| IRT | 11 | 54528 | 6 |
| CBTX | 8 | 26002 | 1 |
| CMCO | 20 | 90248 | 3 |
| RVNC | 11 | 30060 | 2 |
| Average | 12.5 | 50210 | 3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.5 hedge funds with bullish positions and the average amount invested in these stocks was $50 million. That figure was $181 million in AMBC’s case. Columbus McKinnon Corporation (NASDAQ:CMCO) is the most popular stock in this table. On the other hand CBTX, Inc. (NASDAQ:CBTX) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Ambac Financial Group, Inc. (NASDAQ:AMBC) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
