Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by nearly 10 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of Ambarella Inc (NASDAQ:AMBA).
Is Ambarella Inc (NASDAQ:AMBA) ready to rally soon? Hedge funds are betting on the stock. The number of bullish hedge fund positions advanced by 7 in recent months. Our calculations also showed that AMBA 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.
If you'd ask most market participants, hedge funds are viewed as worthless, outdated financial vehicles of years past. While there are greater than 8000 funds with their doors open at the moment, Our researchers look at the bigwigs of this group, around 750 funds. These money managers watch over bulk of the smart money's total asset base, and by tailing their finest investments, Insider Monkey has found a few investment strategies that have historically defeated the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points annually since its inception in May 2014. Our portfolio of short stocks lost 27.8% since February 2017 (through November 21st) even though the market was up more than 39% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
[caption id="attachment_27676" align="aligncenter" width="355"] Israel Englander of Millennium Management[/caption]
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world's most bearish hedge fund that's more convinced than ever that a crash is coming, our long-short investment strategy doesn't rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds' buy/sell signals. Let's take a look at the new hedge fund action surrounding Ambarella Inc (NASDAQ:AMBA).
Hedge fund activity in Ambarella Inc (NASDAQ:AMBA)
At the end of the third quarter, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 33% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in AMBA over the last 17 quarters. So, let's examine 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, David E. Shaw's D E Shaw has the most valuable position in Ambarella Inc (NASDAQ:AMBA), worth close to $61.8 million, accounting for 0.1% of its total 13F portfolio. On D E Shaw's heels is Renaissance Technologies which holds a $49.5 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Remaining professional money managers that are bullish comprise Principal Global Investors's Columbus Circle Investors, Ken Griffin's Citadel Investment Group and Israel Englander's Millennium Management. In terms of the portfolio weights assigned to each position Potrero Capital Research allocated the biggest weight to Ambarella Inc (NASDAQ:AMBA), around 4.26% of its portfolio. P.A.W. Capital Partners is also relatively very bullish on the stock, setting aside 3.13 percent of its 13F equity portfolio to AMBA.
As industrywide interest jumped, key money managers have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the most valuable position in Ambarella Inc (NASDAQ:AMBA). Arrowstreet Capital had $14.1 million invested in the company at the end of the quarter. Ken Fisher's Fisher Asset Management also initiated a $6.9 million position during the quarter. The other funds with brand new AMBA positions are David E. Shaw's D E Shaw, Cliff Asness's AQR Capital Management, and Mike Vranos's Ellington.
Let's check out 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 ESCO Technologies Inc. (NYSE:ESE), Ladder Capital Corp (NYSE:LADR), Core Laboratories N.V. (NYSE:CLB), and National Beverage Corp. (NASDAQ:FIZZ). This group of stocks' market values match AMBA's market value.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ESE,8,3101,4 LADR,12,46418,-1 CLB,14,150203,-7 FIZZ,15,286562,-7 Average,12.25,121571,-2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12.25 hedge funds with bullish positions and the average amount invested in these stocks was $122 million. That figure was $255 million in AMBA's case. National Beverage Corp. (NASDAQ:FIZZ) is the most popular stock in this table. On the other hand ESCO Technologies Inc. (NYSE:ESE) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Ambarella Inc (NASDAQ:AMBA) is more popular among hedge funds. 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 AMBA wasn't nearly as popular as these 20 stocks and hedge funds that were betting on AMBA were disappointed as the stock returned -12.9% during the first two months of the fourth quarter 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 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.