Here is What Hedge Funds Think About Ambarella Inc (AMBA)

It seems that the masses and most of the financial media hate hedge funds and what they do, but why is this hatred of hedge funds so prominent? At the end of the day, these asset management firms do not gamble the hard-earned money of the people who are on the edge of poverty. Truth be told, most hedge fund managers and other smaller players within this industry are very smart and skilled investors. Of course, they may also make wrong bets in some instances, but no one knows what the future holds and how market participants will react to the bountiful news that floods in each day. The S&P 500 Index gained 7.6% in the 12 month-period that ended November 21, while less than 49% of its stocks beat the benchmark. In contrast, the 30 most popular mid-cap stocks among the top hedge fund investors tracked by the Insider Monkey team returned 18% over the same period, which provides evidence that these money managers do have great stock picking abilities. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Ambarella Inc (NASDAQ:AMBA).

Ambarella Inc (NASDAQ:AMBA) shareholders have witnessed an increase in support from the world’s most successful money managers lately. There were 16 funds tracked by Insider Monkey bullish on the company at the end of September, compared to 13 funds at the end of June. At the end of this article we will also compare AMBA to other stocks including TherapeuticsMD Inc (OTC:TXMD), GNC Holdings Inc (NYSE:GNC), and Dean Foods Co (NYSE:DF) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

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With all of this in mind, let’s take a look at the latest action encompassing Ambarella Inc (NASDAQ:AMBA).

What does the smart money think about Ambarella Inc (NASDAQ:AMBA)?

A total of 16 funds tracked by Insider Monkey were long Ambarella at the end of the third quarter, up by 23% sequentially. On the other hand, there were a total of 28 hedge funds with a bullish position in AMBA at the beginning of this year. With the smart money’s capital changing hands, there exists a few notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, John Griffin’s Blue Ridge Capital has the largest position in Ambarella Inc (NASDAQ:AMBA), worth close to $73.5 million, corresponding to 0.9% of its total 13F portfolio. On Blue Ridge Capital’s heels is David E. Shaw’s D E Shaw, which holds a $70.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other professional money managers with similar optimism include Philippe Laffont’s Coatue Management and Christopher A. Winham’s Tide Point Capital. We should note that none of these hedge funds are among our list of the 100 best performing hedge funds which is based on the performance of their 13F long positions in non-microcap stocks.

Consequently, key money managers were leading the bulls’ herd. QVT Financial, led by Daniel Gold, initiated the most valuable position in Ambarella Inc (NASDAQ:AMBA). QVT Financial had $20.3 million invested in the company at the end of the third quarter. Ken Griffin’s Citadel Investment Group also initiated a $15.8 million position during the quarter. The other funds with brand new AMBA positions are Christopher Lord’s Criterion Capital, Peter Muller’s PDT Partners, and Mike Vranos’s Ellington.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Ambarella Inc (NASDAQ:AMBA) but similarly valued. We will take a look at TherapeuticsMD Inc (OTC:TXMD), GNC Holdings Inc (NYSE:GNC), Dean Foods Co (NYSE:DF), and Party City Holdco Inc (NYSE:PRTY). All of these stocks’ market caps are closest to AMBA’s market cap.

As you can see these stocks had an average of 18 funds holding shares and the average amount invested in these stocks was $90 million. That figure was $332 million in AMBA’s case. GNC Holdings Inc (NYSE:GNC) is the most popular stock in this table with 28 funds having reported long positions. On the other hand Party City Holdco Inc (NYSE:PRTY) is the least popular one with only nine bullish hedge fund positions. Ambarella Inc (NASDAQ:AMBA) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard GNC Holdings Inc (NYSE:GNC) might be a better candidate to consider taking a long position in.

Disclosure: none