Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Ambarella Inc (NASDAQ:AMBA).
Is AMBA a good stock to buy? Hedge funds were in a bullish mood. The number of bullish hedge fund bets moved up by 7 lately. Ambarella Inc (NASDAQ:AMBA) was in 34 hedge funds’ portfolios at the end of September. The all time high for this statistic is 30. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AMBA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Kerr Neilson of Platinum Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the House passed a landmark bill decriminalizing marijuana. So, we are checking out this under the radar cannabis stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website. Keeping this in mind we’re going to check out the recent hedge fund action surrounding Ambarella Inc (NASDAQ:AMBA).
Do Hedge Funds Think AMBA Is A Good Stock To Buy Now?
At third quarter’s end, a total of 34 of the hedge funds tracked by Insider Monkey were long this stock, a change of 26% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMBA over the last 21 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).
Among these funds, Renaissance Technologies held the most valuable stake in Ambarella Inc (NASDAQ:AMBA), which was worth $62.7 million at the end of the third quarter. On the second spot was Platinum Asset Management which amassed $20.1 million worth of shares. D E Shaw, KCL Capital, and Two Sigma Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position P.A.W. CAPITAL PARTNERS allocated the biggest weight to Ambarella Inc (NASDAQ:AMBA), around 4.26% of its 13F portfolio. Ardsley Partners is also relatively very bullish on the stock, setting aside 1.24 percent of its 13F equity portfolio to AMBA.
With a general bullishness amongst the heavyweights, specific money managers were leading the bulls’ herd. Platinum Asset Management, managed by Kerr Neilson, established the most valuable position in Ambarella Inc (NASDAQ:AMBA). Platinum Asset Management had $20.1 million invested in the company at the end of the quarter. Philip Hempleman’s Ardsley Partners also made a $6.4 million investment in the stock during the quarter. The other funds with brand new AMBA positions are George McCabe’s Portolan Capital Management, George Soros’s Soros Fund Management, and Brandon Haley’s Holocene Advisors.
Let’s also examine hedge fund activity in other stocks similar to Ambarella Inc (NASDAQ:AMBA). We will take a look at Euronav NV (NYSE:EURN), Barnes Group Inc. (NYSE:B), Enable Midstream Partners LP (NYSE:ENBL), Callaway Golf Company (NYSE:ELY), Studio City International Holdings Limited (NYSE:MSC), Four Corners Property Trust, Inc. (NYSE:FCPT), and Coeur Mining, Inc. (NYSE:CDE). This group of stocks’ market valuations match AMBA’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| EURN | 11 | 67614 | -6 |
| B | 13 | 37329 | -6 |
| ENBL | 4 | 8820 | -1 |
| ELY | 32 | 390873 | 8 |
| MSC | 3 | 277757 | 0 |
| FCPT | 13 | 67476 | -6 |
| CDE | 15 | 44740 | 1 |
| Average | 13 | 127801 | -1.4 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 13 hedge funds with bullish positions and the average amount invested in these stocks was $128 million. That figure was $192 million in AMBA’s case. Callaway Golf Company (NYSE:ELY) is the most popular stock in this table. On the other hand Studio City International Holdings Limited (NYSE:MSC) is the least popular one with only 3 bullish hedge fund positions. Compared to these stocks Ambarella Inc (NASDAQ:AMBA) is more popular among hedge funds. Our overall hedge fund sentiment score for AMBA is 90. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 33.3% in 2020 through December 18th but still managed to beat the market by 16.4 percentage points. Hedge funds were also right about betting on AMBA as the stock returned 68.8% since the end of September (through 12/18) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.
