At Insider Monkey, we pore over the filings of nearly 750 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of December 31. In this article, we will use that wealth of knowledge to determine whether or not Arlo Technologies, Inc. (NYSE:ARLO) makes for a good investment right now.
Is Arlo Technologies, Inc. (NYSE:ARLO) a bargain? Investors who are in the know are turning less bullish. The number of long hedge fund positions dropped by 4 lately. Our calculations also showed that ARLO isn’t among the 30 most popular stocks among hedge funds. ARLO was in 8 hedge funds’ portfolios at the end of the fourth quarter of 2018. There were 12 hedge funds in our database with ARLO positions at the end of the previous quarter.
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 20.7% year to date (through March 12th) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 32 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.
Stuart Zimmer of Zimmer Partners
We’re going to take a look at the recent hedge fund action surrounding Arlo Technologies, Inc. (NYSE:ARLO).
What does the smart money think about Arlo Technologies, Inc. (NYSE:ARLO)?
At the end of the fourth quarter, a total of 8 of the hedge funds tracked by Insider Monkey were long this stock, a change of -33% from the previous quarter. By comparison, 0 hedge funds held shares or bullish call options in ARLO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Newtyn Management was the largest shareholder of Arlo Technologies, Inc. (NYSE:ARLO), with a stake worth $4.2 million reported as of the end of September. Trailing Newtyn Management was Millennium Management, which amassed a stake valued at $2.2 million. Citadel Investment Group, OZ Management, and Weld Capital Management were also very fond of the stock, giving the stock large weights in their portfolios.
Because Arlo Technologies, Inc. (NYSE:ARLO) has experienced a decline in interest from the smart money, it’s easy to see that there lies a certain “tier” of fund managers who were dropping their full holdings in the third quarter. At the top of the heap, Anand Parekh’s Alyeska Investment Group dropped the largest position of the “upper crust” of funds monitored by Insider Monkey, worth an estimated $5.8 million in stock. Stuart J. Zimmer’s fund, Zimmer Partners, also cut its stock, about $4.4 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 4 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Arlo Technologies, Inc. (NYSE:ARLO). These stocks are National Energy Services Reunited Corp. (NASDAQ:NESR), Perficient, Inc. (NASDAQ:PRFT), Goldman Sachs BDC, Inc. (NYSE:GSBD), and CSW Industrials, Inc. (NASDAQ:CSWI). This group of stocks’ market valuations are similar to ARLO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NESR | 4 | 25193 | 0 |
| PRFT | 14 | 21710 | -5 |
| GSBD | 4 | 4834 | 0 |
| CSWI | 16 | 43765 | 6 |
| Average | 9.5 | 23876 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.5 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $10 million in ARLO’s case. CSW Industrials, Inc. (NASDAQ:CSWI) is the most popular stock in this table. On the other hand National Energy Services Reunited Corp. (NASDAQ:NESR) is the least popular one with only 4 bullish hedge fund positions. Arlo Technologies, Inc. (NYSE:ARLO) 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. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. Unfortunately ARLO wasn’t nearly as popular as these 15 stock (hedge fund sentiment was quite bearish); ARLO investors were disappointed as the stock returned -60.9% and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 15 most popular stocks) among hedge funds as 13 of these stocks already outperformed the market this year.
Disclosure: None. This article was originally published at Insider Monkey.
