Where Do Hedge Funds Stand On Ambarella Inc (AMBA)?

At Insider Monkey, we pore over the filings of nearly 866 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we’ve gathered as a result gives us access to a wealth of collective knowledge based on these firms’ portfolio holdings as of March 31st. In this article, we will use that wealth of knowledge to determine whether or not Ambarella Inc (NASDAQ:AMBA) makes for a good investment right now.

Ambarella Inc (NASDAQ:AMBA) investors should be aware of a decrease in enthusiasm from smart money lately. Ambarella Inc (NASDAQ:AMBA) was in 35 hedge funds’ portfolios at the end of March. The all time high for this statistic is 36. There were 36 hedge funds in our database with AMBA holdings at the end of December. Our calculations also showed that AMBA isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Hedge funds have more than $3.5 trillion in assets under management, so you can’t expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds’ moves today.

Scott Bessent of Key Square Capital Management

Scott Bessent of Key Square Capital Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best battery 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 let’s review the key hedge fund action encompassing Ambarella Inc (NASDAQ:AMBA).

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

At Q1’s end, a total of 35 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from one quarter earlier. On the other hand, there were a total of 21 hedge funds with a bullish position in AMBA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Ambarella Inc (NASDAQ:AMBA) was held by Renaissance Technologies, which reported holding $55.1 million worth of stock at the end of December. It was followed by Citadel Investment Group with a $26.6 million position. Other investors bullish on the company included KCL Capital, Newbrook Capital Advisors, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position P.A.W. CAPITAL PARTNERS allocated the biggest weight to Ambarella Inc (NASDAQ:AMBA), around 4.24% of its 13F portfolio. KCL Capital is also relatively very bullish on the stock, earmarking 2.39 percent of its 13F equity portfolio to AMBA.

Due to the fact that Ambarella Inc (NASDAQ:AMBA) has witnessed a decline in interest from hedge fund managers, we can see that there lies a certain “tier” of money managers who sold off their positions entirely heading into Q2. Intriguingly, Principal Global Investors’s Columbus Circle Investors dumped the biggest position of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $43.9 million in stock. Spencer M. Waxman’s fund, Shannon River Fund Management, also sold off its stock, about $11.8 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q2.

Let’s go over hedge fund activity in other stocks similar to Ambarella Inc (NASDAQ:AMBA). We will take a look at Dana Incorporated (NYSE:DAN), CareDx, Inc. (NASDAQ:CDNA), Mantech International Corp (NASDAQ:MANT), Rogers Corporation (NYSE:ROG), Grocery Outlet Holding Corp. (NASDAQ:GO), Moelis & Company (NYSE:MC), and Insmed Incorporated (NASDAQ:INSM). This group of stocks’ market valuations resemble AMBA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
DAN 26 545924 -2
CDNA 23 693239 3
MANT 14 34971 3
ROG 17 228144 -3
GO 15 56182 -2
MC 19 142103 -1
INSM 22 573375 -6
Average 19.4 324848 -1.1

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $325 million. That figure was $287 million in AMBA’s case. Dana Incorporated (NYSE:DAN) is the most popular stock in this table. On the other hand Mantech International Corp (NASDAQ:MANT) is the least popular one with only 14 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 83.2. 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 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 19.3% in 2021 through June 25th and still beat the market by 4.8 percentage points. Unfortunately AMBA wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on AMBA were disappointed as the stock returned 3.4% since the end of the first quarter (through 6/25) 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.