We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards McAfee Corp. (NASDAQ:MCFE).
Is McAfee Corp. (NASDAQ:MCFE) the right investment to pursue these days? Money managers were taking a bullish view. The number of long hedge fund positions inched up by 13 recently. McAfee Corp. (NASDAQ:MCFE) was in 31 hedge funds’ portfolios at the end of September. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MCFE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 18 hedge funds in our database with MCFE positions at the end of the second quarter.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV 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. With all of this in mind we’re going to analyze the new hedge fund action regarding McAfee Corp. (NASDAQ:MCFE).
Peter Rathjens of Arrowstreet Capital
Do Hedge Funds Think MCFE Is A Good Stock To Buy Now?
At the end of September, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 72% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards MCFE over the last 25 quarters. With hedgies’ capital changing hands, there exists a select group of key hedge fund managers who were boosting their holdings meaningfully (or already accumulated large positions).
More specifically, Citadel Investment Group was the largest shareholder of McAfee Corp. (NASDAQ:MCFE), with a stake worth $48 million reported as of the end of September. Trailing Citadel Investment Group was Indaba Capital Management, which amassed a stake valued at $36.5 million. Schonfeld Strategic Advisors, Nitorum Capital, and Arrowstreet Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Yarra Square Partners allocated the biggest weight to McAfee Corp. (NASDAQ:MCFE), around 7.86% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, designating 3.86 percent of its 13F equity portfolio to MCFE.
Consequently, some big names have been driving this bullishness. Indaba Capital Management, managed by Derek C. Schrier, assembled the biggest position in McAfee Corp. (NASDAQ:MCFE). Indaba Capital Management had $36.5 million invested in the company at the end of the quarter. Seth Rosen’s Nitorum Capital also initiated a $30.5 million position during the quarter. The other funds with new positions in the stock are Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Tor Minesuk’s Mondrian Capital, and Steve Cohen’s Point72 Asset Management.
Let’s go over hedge fund activity in other stocks similar to McAfee Corp. (NASDAQ:MCFE). We will take a look at CyrusOne Inc (NASDAQ:CONE), Lithia Motors Inc (NYSE:LAD), Amdocs Limited (NASDAQ:DOX), NiSource Inc. (NYSE:NI), TFI International Inc. (NYSE:TFII), The Middleby Corporation (NASDAQ:MIDD), and Altice USA, Inc. (NYSE:ATUS). All of these stocks’ market caps resemble MCFE’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CONE | 27 | 495607 | 1 |
| LAD | 64 | 2823225 | 1 |
| DOX | 24 | 824398 | -5 |
| NI | 24 | 435539 | -12 |
| TFII | 23 | 270343 | 10 |
| MIDD | 29 | 567959 | -6 |
| ATUS | 59 | 1167928 | 15 |
| Average | 35.7 | 940714 | 0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $941 million. That figure was $331 million in MCFE’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 23 bullish hedge fund positions. McAfee Corp. (NASDAQ:MCFE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MCFE is 49.8. 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 28.6% in 2021 through November 30th and still beat the market by 5.6 percentage points. A small number of hedge funds were also right about betting on MCFE as the stock returned 16.9% since the end of the third quarter (through 11/30) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.
