Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Ambarella Inc (NASDAQ:AMBA).
Ambarella Inc (NASDAQ:AMBA) was in 27 hedge funds’ portfolios at the end of September. AMBA investors should pay attention to an increase in hedge fund sentiment in recent months. There were 26 hedge funds in our database with AMBA holdings at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity, but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Guess?, Inc. (NYSE:GES), Diplomat Pharmacy Inc (NYSE:DPLO), and Watts Water Technologies Inc (NYSE:WTS) to gather more data points.
Follow Ambarella Inc (NASDAQ:AMBA)
Follow Ambarella Inc (NASDAQ:AMBA)
In the financial world there are plenty of methods investors put to use to assess publicly traded companies. Two of the most under-the-radar methods are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the top picks of the elite money managers can outpace the market by a very impressive amount (see the details here).
With all of this in mind, let’s take a look at the recent action surrounding Ambarella Inc (NASDAQ:AMBA).
Hedge fund activity in Ambarella Inc (NASDAQ:AMBA)
At the Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of 4% from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Eric Bannasch’s Cadian Capital has the number one position in Ambarella Inc (NASDAQ:AMBA), worth close to $47.5 million, comprising 1.7% of its total 13F portfolio. Sitting at the No. 2 spot is Philippe Laffont of Coatue Management, with an $34.3 million position; 0.4% of its 13F portfolio is allocated to the company. Remaining peers that hold long positions include Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ricky Sandler’s Eminence Capital and Joel Greenblatt’s Gotham Asset Management.
As one would reasonably expect, specific money managers were leading the bulls’ herd. Gotham Asset Management, managed by Joel Greenblatt, initiated the biggest position in Ambarella Inc (NASDAQ:AMBA). Gotham Asset Management had $22.3 million invested in the company at the end of the quarter. John Lykouretzos’s Hoplite Capital Management also initiated an $18.7 million position during the quarter. The following funds were also among the new AMBA investors: Jim Simons’ Renaissance Technologies, Christopher Lord’s Criterion Capital, and Israel Englander’s Millennium Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Ambarella Inc (NASDAQ:AMBA) but similarly valued. These stocks are Guess?, Inc. (NYSE:GES), Diplomat Pharmacy Inc (NYSE:DPLO), Watts Water Technologies Inc (NYSE:WTS), and Five Below Inc (NASDAQ:FIVE). This group of stocks’ market caps are similar to AMBA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| GES | 15 | 153289 | 1 |
| DPLO | 15 | 81680 | 3 |
| WTS | 14 | 321960 | -2 |
| FIVE | 12 | 148283 | -8 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $176 million, below the $324 million figure in AMBA’s case. Guess?, Inc. (NYSE:GES) is the most popular stock in this table. On the other hand Five Below Inc (NASDAQ:FIVE) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks, Ambarella Inc (NASDAQ:AMBA) 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.
