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The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We have processed the filings of the more than 817 world-class investment firms that we track and now have access to the collective wisdom contained in these filings, which are based on their September 30 holdings, data that is available nowhere else. Should you consider Ambac Financial Group, Inc. (NYSE:AMBC) for your portfolio? We'll look to this invaluable collective wisdom for the answer.
Is AMBC a good stock to buy now? The best stock pickers were selling. The number of bullish hedge fund positions dropped by 1 in recent months. Ambac Financial Group, Inc. (NYSE:AMBC) was in 15 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 27. Our calculations also showed that AMBC 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.
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 monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Michael Hintze of CQS Cayman LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now we're going to go over the fresh hedge fund action regarding Ambac Financial Group, Inc. (NYSE:AMBC).
Do Hedge Funds Think AMBC Is A Good Stock To Buy Now?
At the end of September, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -6% from the previous quarter. By comparison, 14 hedge funds held shares or bullish call options in AMBC 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, EJF Capital was the largest shareholder of Ambac Financial Group, Inc. (NYSE:AMBC), with a stake worth $24.3 million reported as of the end of September. Trailing EJF Capital was CQS Cayman LP, which amassed a stake valued at $10.5 million. Raging Capital Management, Rubric Capital Management, and Alyeska Investment Group 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 Raging Capital Management allocated the biggest weight to Ambac Financial Group, Inc. (NYSE:AMBC), around 5.75% of its 13F portfolio. EJF Capital is also relatively very bullish on the stock, earmarking 2.03 percent of its 13F equity portfolio to AMBC.
Due to the fact that Ambac Financial Group, Inc. (NYSE:AMBC) has experienced declining sentiment from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that elected to cut their full holdings by the end of the third quarter. Interestingly, David Harding's Winton Capital Management sold off the biggest position of all the hedgies tracked by Insider Monkey, worth an estimated $1.9 million in stock, and Dan Kamensky's Marble Ridge Capital was right behind this move, as the fund dumped about $1.8 million worth. These transactions are interesting, as total hedge fund interest dropped by 1 funds by the end of the third quarter.
Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Ambac Financial Group, Inc. (NYSE:AMBC) but similarly valued. These stocks are HomeStreet Inc (NASDAQ:HMST), Qutoutiao Inc. (NASDAQ:QTT), First Foundation Inc (NASDAQ:FFWM), El Pollo LoCo Holdings Inc (NASDAQ:LOCO), Premier Financial Corp. (NASDAQ:PFC), America's Car-Mart, Inc. (NASDAQ:CRMT), and Cass Information Systems (NASDAQ:CASS). This group of stocks' market values match AMBC's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HMST,11,34030,-2 QTT,5,1760,0 FFWM,17,50800,3 LOCO,8,28594,-2 PFC,13,46734,3 CRMT,9,63653,-5 CASS,5,11771,-4 Average,9.7,33906,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 9.7 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $61 million in AMBC's case. First Foundation Inc (NASDAQ:FFWM) is the most popular stock in this table. On the other hand Qutoutiao Inc. (NASDAQ:QTT) is the least popular one with only 5 bullish hedge fund positions. Ambac Financial Group, Inc. (NYSE:AMBC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for AMBC is 62.3. 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 gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on AMBC as the stock returned 35.9% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.