Were Hedge Funds Right About Arlo Technologies, Inc. (ARLO)?

In this article we will take a look at whether hedge funds think Arlo Technologies, Inc. (NYSE:ARLO) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Is Arlo Technologies, Inc. (NYSE:ARLO) the right investment to pursue these days? Prominent investors were taking a bullish view. The number of bullish hedge fund positions went up by 1 recently. Arlo Technologies, Inc. (NYSE:ARLO) was in 18 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic was previously 17. 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 Q1 rankings).

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, pet market is growing at a 7% annual rate and is expected to reach $110 billion in 2021. So, we are checking out the 5 best stocks for animal lovers. We go through lists like the 15 best Jim Cramer stocks to identify the next Tesla that will deliver outsized returns. 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. With all of this in mind let’s take a look at the key hedge fund action surrounding Arlo Technologies, Inc. (NYSE:ARLO).

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

Heading into the second quarter of 2021, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 6% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options 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 Arrowstreet Capital, which reported holding $6.3 million worth of stock at the end of December. It was followed by Cannell Capital with a $6.1 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position AWH Capital allocated the biggest weight to Arlo Technologies, Inc. (NYSE:ARLO), around 2.05% of its 13F portfolio. Cannell Capital is also relatively very bullish on the stock, dishing out 1.37 percent of its 13F equity portfolio to ARLO.

As aggregate interest increased, key hedge funds have been driving this bullishness. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, initiated the most valuable position in Arlo Technologies, Inc. (NYSE:ARLO). Marshall Wace LLP had $0.5 million invested in the company at the end of the quarter. Matthew L Pinz’s Pinz Capital also made a $0.1 million investment in the stock during the quarter. The only other fund with a brand new ARLO position is Keith M. Rosenbloom’s Cruiser Capital Advisors.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Arlo Technologies, Inc. (NYSE:ARLO) but similarly valued. We will take a look at The First of Long Island Corporation (NASDAQ:FLIC), Boqii Holding Limited (NYSE:BQ), REX American Resources Corp (NYSE:REX), MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT), IRSA Propiedades Comerciales S.A. (NASDAQ:IRCP), AerSale Corporation (NASDAQ:ASLE), and Crinetics Pharmaceuticals, Inc. (NASDAQ:CRNX). All of these stocks’ market caps are similar to ARLO’s market cap.

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As you can see these stocks had an average of 9.6 hedge funds with bullish positions and the average amount invested in these stocks was $113 million. That figure was $38 million in ARLO’s case. MasterCraft Boat Holdings, Inc. (NASDAQ:MCFT) is the most popular stock in this table. On the other hand Boqii Holding Limited (NYSE:BQ) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Arlo Technologies, Inc. (NYSE:ARLO) is more popular among hedge funds. Our overall hedge fund sentiment score for ARLO is 86. 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 gained 28.5% in 2021 through July 23rd and still beat the market by 10.1 percentage points. Unfortunately ARLO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on ARLO were disappointed as the stock returned -0.6% since the end of the first quarter (through 7/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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