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 Arlo Technologies, Inc. (NYSE:ARLO) for your portfolio? We’ll look to this invaluable collective wisdom for the answer.
Is ARLO a good stock to buy now? Arlo Technologies, Inc. (NYSE:ARLO) has seen an increase in support from the world’s most elite money managers recently. Arlo Technologies, Inc. (NYSE:ARLO) was in 16 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 15. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. 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 for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
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. With all of this in mind we’re going to take a peek at the new hedge fund action regarding Arlo Technologies, Inc. (NYSE:ARLO).
Do Hedge Funds Think ARLO Is A Good Stock To Buy Now?
At third quarter’s end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of 7% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in ARLO over the last 21 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Cannell Capital, managed by J. Carlo Cannell, holds the number one position in Arlo Technologies, Inc. (NYSE:ARLO). Cannell Capital has a $13.3 million position in the stock, comprising 4.9% of its 13F portfolio. Sitting at the No. 2 spot is Israel Englander of Millennium Management, with a $6.1 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions comprise Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Renaissance Technologies and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Arlo Technologies, Inc. (NYSE:ARLO), around 4.87% of its 13F portfolio. AWH Capital is also relatively very bullish on the stock, earmarking 2.46 percent of its 13F equity portfolio to ARLO.
As one would reasonably expect, some big names have jumped into Arlo Technologies, Inc. (NYSE:ARLO) headfirst. Citadel Investment Group, managed by Ken Griffin, initiated the most outsized position in Arlo Technologies, Inc. (NYSE:ARLO). Citadel Investment Group had $2.2 million invested in the company at the end of the quarter. Phil Frohlich’s Prescott Group Capital Management also initiated a $0.4 million position during the quarter. The only other fund with a new position in the stock is Paul Tudor Jones’s Tudor Investment Corp.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Arlo Technologies, Inc. (NYSE:ARLO) but similarly valued. These stocks are ASA Gold and Precious Metals Ltd (NYSE:ASA), U.S. Xpress Enterprises, Inc. (NYSE:USX), ProPetro Holding Corp. (NYSE:PUMP), Beazer Homes USA, Inc. (NYSE:BZH), Dorian LPG Ltd (NYSE:LPG), International Seaways, Inc. (NYSE:INSW), and China Online Education Group (NYSE:COE). This group of stocks’ market valuations are similar to ARLO’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 11.7 hedge funds with bullish positions and the average amount invested in these stocks was $41 million. That figure was $43 million in ARLO’s case. ProPetro Holding Corp. (NYSE:PUMP) is the most popular stock in this table. On the other hand China Online Education Group (NYSE:COE) is the least popular one with only 4 bullish hedge fund positions. Arlo Technologies, Inc. (NYSE:ARLO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ARLO is 82.2. 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 ARLO as the stock returned 60.3% since the end of Q3 (through 12/14) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.