Did Hedge Funds Drop The Ball On Amber Road Inc (AMBR) ?

How do you pick the next stock to invest in? One way would be to spend hours of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Amber Road Inc (NYSE:AMBR).

Amber Road Inc (NYSE:AMBR) has seen an increase in hedge fund interest of late. Our calculations also showed that AMBR isn’t among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Arnaud Ajdler Engine Capital

Arnaud Ajdler Engine Capital

Let’s take a look at the new hedge fund action encompassing Amber Road Inc (NYSE:AMBR).

How have hedgies been trading Amber Road Inc (NYSE:AMBR)?

Heading into the second quarter of 2019, a total of 11 of the hedge funds tracked by Insider Monkey were long this stock, a change of 22% from the previous quarter. On the other hand, there were a total of 7 hedge funds with a bullish position in AMBR 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.


More specifically, Altai Capital was the largest shareholder of Amber Road Inc (NYSE:AMBR), with a stake worth $21.4 million reported as of the end of March. Trailing Altai Capital was Royce & Associates, which amassed a stake valued at $15.6 million. Renaissance Technologies, Divisar Capital, and Harbert Management were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names have been driving this bullishness. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, assembled the largest position in Amber Road Inc (NYSE:AMBR). Arrowstreet Capital had $1 million invested in the company at the end of the quarter. Israel Englander’s Millennium Management also initiated a $0.8 million position during the quarter. The only other fund with a new position in the stock is Arnaud Ajdler’s Engine Capital.

Let’s check out hedge fund activity in other stocks similar to Amber Road Inc (NYSE:AMBR). We will take a look at Applied Optoelectronics Inc (NASDAQ:AAOI), Novavax, Inc. (NASDAQ:NVAX), NCS Multistage Holdings, Inc. (NASDAQ:NCSM), and Gold Resource Corporation (NYSE:GORO). This group of stocks’ market values are closest to AMBR’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAOI 13 20308 2
NVAX 11 8979 -2
NCSM 5 1509 1
GORO 9 14483 2
Average 9.5 11320 0.75

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 $11 million. That figure was $62 million in AMBR’s case. Applied Optoelectronics Inc (NASDAQ:AAOI) is the most popular stock in this table. On the other hand NCS Multistage Holdings, Inc. (NASDAQ:NCSM) is the least popular one with only 5 bullish hedge fund positions. Amber Road Inc (NYSE:AMBR) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Hedge funds were also right about betting on AMBR as the stock returned 50.2% during the same period and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.