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Hedge Funds Have Never Been This Bullish On Ambarella Inc (AMBA)

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A whopping number of 13F filings filed with U.S. Securities and Exchange Commission has been processed by Insider Monkey so that individual investors can look at the overall hedge fund sentiment towards the stocks included in their watchlists. These freshly-submitted public filings disclose money managers’ equity positions as of the end of the three-month period that ended June 30th, so let’s proceed with the discussion of the hedge fund sentiment on Ambarella Inc (NASDAQ:AMBA).

Is Ambarella Inc (NASDAQ:AMBA) a great investment today? Prominent investors were becoming more confident. The number of bullish hedge fund positions inched up by 2 in recent months. Ambarella Inc (NASDAQ:AMBA) was in 37 hedge funds' portfolios at the end of the second quarter of 2021. The all time high for this statistic was previously 36. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that AMBA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 35 hedge funds in our database with AMBA positions at the end of the first quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Gavin Saitowitz of Prelude Capital
Gavin Saitowitz of Prelude Capital

Gavin Saitowitz of Prelude Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we're going to take a glance at the new hedge fund action encompassing Ambarella Inc (NASDAQ:AMBA).

Do Hedge Funds Think AMBA Is A Good Stock To Buy Now?

At second quarter's end, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in AMBA over the last 24 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Of the funds tracked by Insider Monkey, Renaissance Technologies has the number one position in Ambarella Inc (NASDAQ:AMBA), worth close to $54.2 million, amounting to 0.1% of its total 13F portfolio. Sitting at the No. 2 spot is Robert Boucai of Newbrook Capital Advisors, with a $43.4 million position; the fund has 2.9% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions include Kevin Cottrell and Chris LaSusa's KCL Capital, John Overdeck and David Siegel's Two Sigma Advisors and Spencer M. Waxman's Shannon River Fund Management. In terms of the portfolio weights assigned to each position KCL Capital allocated the biggest weight to Ambarella Inc (NASDAQ:AMBA), around 5.02% of its 13F portfolio. P.A.W. CAPITAL PARTNERS is also relatively very bullish on the stock, designating 4.3 percent of its 13F equity portfolio to AMBA.

Consequently, key money managers were leading the bulls' herd. Shannon River Fund Management, managed by Spencer M. Waxman, assembled the most valuable position in Ambarella Inc (NASDAQ:AMBA). Shannon River Fund Management had $28.5 million invested in the company at the end of the quarter. Michael Rockefeller and KarláKroeker's Woodline Partners also initiated a $13 million position during the quarter. The other funds with new positions in the stock are Matthew Hulsizer's PEAK6 Capital Management, Jinghua Yan's TwinBeech Capital, and Gavin Saitowitz and Cisco J. del Valle's Prelude Capital (previously Springbok Capital).

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 Aerojet Rocketdyne Holdings Inc (NYSE:AJRD), Schneider National, Inc. (NYSE:SNDR), Hancock Whitney Corporation (NASDAQ:HWC), Digitalbridge Group Inc (NYSE:DBRG), Editas Medicine, Inc. (NASDAQ:EDIT), Eastern Bankshares, Inc. (NASDAQ:EBC), and Denbury Inc. (NYSE:DEN). This group of stocks' market caps are similar to AMBA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AJRD,29,845940,-1 SNDR,20,122133,1 HWC,22,127792,7 DBRG,29,686986,4 EDIT,23,506626,-1 EBC,20,115205,6 DEN,29,996614,-1 Average,24.6,485899,2.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.6 hedge funds with bullish positions and the average amount invested in these stocks was $486 million. That figure was $342 million in AMBA's case. Aerojet Rocketdyne Holdings Inc (NYSE:AJRD) is the most popular stock in this table. On the other hand Schneider National, Inc. (NYSE:SNDR) is the least popular one with only 20 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 21.8% in 2021 through October 11th but still managed to beat the market by 4.4 percentage points. Hedge funds were also right about betting on AMBA as the stock returned 41.2% since the end of June (through 10/11) 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.