In this article we are going to use hedge fund sentiment as a tool and determine whether Ambarella Inc (NASDAQ:AMBA) is a good investment right now. We like to analyze hedge fund sentiment before conducting days of in-depth research. We do so because hedge funds and other elite investors have numerous Ivy League graduates, expert network advisers, and supply chain tipsters working or consulting for them. There is not a shortage of news stories covering failed hedge fund investments and it is a fact that hedge funds’ picks don’t beat the market 100% of the time, but their consensus picks have historically done very well and have outperformed the market after adjusting for risk.
Is AMBA stock a buy or sell? Ambarella Inc (NASDAQ:AMBA) was in 36 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 34. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. AMBA has seen an increase in support from the world’s most elite money managers in recent months. There were 34 hedge funds in our database with AMBA holdings at the end of September. Our calculations also showed that AMBA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 124 percentage points since March 2017 (see the details here).
Bruce Kovner of Caxton Associates LP
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 10 best battery stocks to buy to identify the next stock with 10x upside potential. 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 let’s check out the new hedge fund action surrounding Ambarella Inc (NASDAQ:AMBA).
Do Hedge Funds Think AMBA Is A Good Stock To Buy Now?
At the end of the fourth quarter, a total of 36 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards AMBA over the last 22 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Renaissance Technologies held the most valuable stake in Ambarella Inc (NASDAQ:AMBA), which was worth $77.2 million at the end of the fourth quarter. On the second spot was Columbus Circle Investors which amassed $43.9 million worth of shares. D E Shaw, Maplelane Capital, and Millennium Management 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 4.46% of its 13F portfolio. Southport Management is also relatively very bullish on the stock, dishing out 2.75 percent of its 13F equity portfolio to AMBA.
As industrywide interest jumped, key hedge funds were leading the bulls’ herd. Columbus Circle Investors, managed by Principal Global Investors, created the most outsized position in Ambarella Inc (NASDAQ:AMBA). Columbus Circle Investors had $43.9 million invested in the company at the end of the quarter. Leon Shaulov’s Maplelane Capital also made a $30.8 million investment in the stock during the quarter. The other funds with brand new AMBA positions are Spencer M. Waxman’s Shannon River Fund Management, Josh Goldberg’s G2 Investment Partners Management, and Bruce Kovner’s Caxton Associates LP.
Let’s now review 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 ALLETE Inc (NYSE:ALE), LivaNova PLC (NASDAQ:LIVN), Home Bancshares Inc (NASDAQ:HOMB), Univar Solutions Inc (NYSE:UNVR), Pactiv Evergreen Inc. (NASDAQ:PTVE), BankUnited Inc (NYSE:BKU), and AMN Healthcare Services Inc (NYSE:AMN). This group of stocks’ market caps are closest to AMBA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALE | 11 | 90048 | -9 |
| LIVN | 30 | 547350 | 4 |
| HOMB | 12 | 37950 | -2 |
| UNVR | 31 | 712512 | 1 |
| PTVE | 7 | 118932 | -8 |
| BKU | 11 | 121421 | -3 |
| AMN | 13 | 32646 | -3 |
| Average | 16.4 | 237266 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.4 hedge funds with bullish positions and the average amount invested in these stocks was $237 million. That figure was $377 million in AMBA’s case. Univar Solutions Inc (NYSE:UNVR) is the most popular stock in this table. On the other hand Pactiv Evergreen Inc. (NASDAQ:PTVE) is the least popular one with only 7 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 87. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks returned 7.9% in 2021 through April 1st but still managed to beat the market by 0.4 percentage points. Hedge funds were also right about betting on AMBA as the stock returned 14.6% since the end of December (through 4/1) 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.
