We are still in an overall bull market and many stocks that smart money investors were piling into surged through the end of November. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 54% and 51% respectively. Hedge funds' top 3 stock picks returned 41.7% this year and beat the S&P 500 ETFs by 14 percentage points. Investing in index funds guarantees your average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like Arlo Technologies, Inc. (NYSE:ARLO).
Arlo Technologies, Inc. (NYSE:ARLO) has experienced a decrease in support from the world's most elite money managers recently. ARLO was in 11 hedge funds' portfolios at the end of the third quarter of 2019. There were 14 hedge funds in our database with ARLO positions at the end of the previous quarter. Our calculations also showed that ARLO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the 21st-century investor’s toolkit, there is a multitude of formulas market participants use to analyze publicly traded companies. Two of the most underrated formulas are hedge fund and insider trading interest. We have shown that, historically, those who follow the best picks of the top money managers can trounce their index-focused peers by a significant amount (see the details here).
[caption id="attachment_26340" align="alignnone" width="594"] Ken Griffin of Citadel Investment Group[/caption]
We leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world's largest cannabis market, so we check out this European marijuana stock pitch. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We also rely on the best performing hedge funds' buy/sell signals. Let's take a gander at the key hedge fund action regarding Arlo Technologies, Inc. (NYSE:ARLO).
How have hedgies been trading Arlo Technologies, Inc. (NYSE:ARLO)?
Heading into the fourth quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -21% from the previous quarter. On the other hand, there were a total of 12 hedge funds with a bullish position in ARLO a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Arlo Technologies, Inc. (NYSE:ARLO) was held by VIEX Capital Advisors, which reported holding $8.3 million worth of stock at the end of September. It was followed by Cannell Capital with a $7.4 million position. Other investors bullish on the company included D E Shaw, Millennium Management, and Springbok Capital. In terms of the portfolio weights assigned to each position, VIEX Capital Advisors allocated the biggest weight to Arlo Technologies, Inc. (NYSE:ARLO), around 4.92% of its 13F portfolio. Emancipation Capital is also relatively very bullish on the stock, dishing out 2.4 percent of its 13F equity portfolio to ARLO.
Seeing as Arlo Technologies, Inc. (NYSE:ARLO) has experienced declining sentiment from the aggregate hedge fund industry, we can see that there exist a select few fund managers who sold off their positions entirely heading into Q4. Intriguingly, Eric Singer's VIEX Capital Advisors said goodbye to the largest stake of the 750 funds watched by Insider Monkey, worth an estimated $3.9 million in stock, and Ken Griffin's Citadel Investment Group was right behind this move, as the fund sold off about $0.4 million worth. These transactions are important to note, as total hedge fund interest dropped by 3 funds heading into Q4.
Let's also examine hedge fund activity in other stocks similar to Arlo Technologies, Inc. (NYSE:ARLO). These stocks are Western New England Bancorp, Inc. (NASDAQ:WNEB), Alico, Inc. (NASDAQ:ALCO), Albireo Pharma, Inc. (NASDAQ:ALBO), and Sify Technologies Limited (NASDAQ:SIFY). This group of stocks' market valuations matches ARLO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WNEB,5,23226,2 ALCO,6,18892,1 ALBO,11,54443,-1 SIFY,1,746,-1 Average,5.75,24327,0.25 [/table]
View the table here if you experience formatting issues.
As you can see these stocks had an average of 5.75 hedge funds with bullish positions and the average amount invested in these stocks was $24 million. That figure was $25 million in ARLO's case. Albireo Pharma, Inc. (NASDAQ:ALBO) is the most popular stock in this table. On the other hand, Sify Technologies Limited (NASDAQ:SIFY) is the least popular one with only 1 bullish hedge fund position. Arlo Technologies, Inc. (NYSE:ARLO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately, ARLO wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ARLO were disappointed as the stock returned 1.5% during the fourth quarter (through the end of November) and underperformed the market. If you are interested in investing in large-cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.