Billionaire hedge fund managers such as David Abrams, Steve Cohen and Stan Druckenmiller can generate millions or even billions of dollars every year by pinning down high-potential small-cap stocks and pouring cash into these candidates. Small-cap stocks are overlooked by most investors, brokerage houses, and financial services hubs, while the nearly unlimited research abilities of the big players within the hedge fund industry can easily identify the undervalued and high-potential stocks that reside the ignored corners of equity markets. There are numerous small-cap stocks that have turned out to be great winners, which is one of the main reasons the Insider Monkey team pays close attention to the hedge fund activity in relation to these stocks.
Masco Corporation (NYSE:MAS) was in 45 hedge funds’ portfolios at the end of the second quarter of 2019. MAS has experienced an increase in hedge fund interest of late. There were 40 hedge funds in our database with MAS holdings at the end of the previous quarter. Our calculations also showed that MAS isn’t among the 30 most popular stocks among hedge funds.
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. 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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Unlike this former hedge fund manager who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to go over the key hedge fund action regarding Masco Corporation (NYSE:MAS).
Hedge fund activity in Masco Corporation (NYSE:MAS)
Heading into the third quarter of 2019, a total of 45 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the first quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MAS over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Two Sigma Advisors held the most valuable stake in Masco Corporation (NYSE:MAS), which was worth $192.3 million at the end of the second quarter. On the second spot was AQR Capital Management which amassed $177.4 million worth of shares. Moreover, Millennium Management, Interval Partners, and Jet Capital Investors were also bullish on Masco Corporation (NYSE:MAS), allocating a large percentage of their portfolios to this stock.
Consequently, specific money managers were leading the bulls’ herd. Jet Capital Investors, managed by Matthew Mark, assembled the largest call position in Masco Corporation (NYSE:MAS). Jet Capital Investors had $77.3 million invested in the company at the end of the quarter. Gregg Moskowitz’s Interval Partners also initiated a $14.3 million position during the quarter. The following funds were also among the new MAS investors: Robert Polak’s Anchor Bolt Capital, Nick Niell’s Arrowgrass Capital Partners, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Masco Corporation (NYSE:MAS) but similarly valued. We will take a look at Duke Realty Corporation (NYSE:DRE), Norwegian Cruise Line Holdings Ltd (NYSE:NCLH), Leidos Holdings Inc (NYSE:LDOS), and Telecom Italia S.p.A. (NYSE:TI). This group of stocks’ market values resemble MAS’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DRE | 23 | 412696 | 7 |
| NCLH | 35 | 965515 | 0 |
| LDOS | 23 | 415779 | 2 |
| TI | 1 | 3257 | 0 |
| Average | 20.5 | 449312 | 2.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.5 hedge funds with bullish positions and the average amount invested in these stocks was $449 million. That figure was $1084 million in MAS’s case. Norwegian Cruise Line Holdings Ltd (NYSE:NCLH) is the most popular stock in this table. On the other hand Telecom Italia S.p.A. (NYSE:TI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Masco Corporation (NYSE:MAS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks (see the video below) among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MAS as the stock returned 6.6% during Q3 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
