“Since 2006, value stocks (IVE vs IVW) have underperformed 11 of the 13 calendar years and when they beat growth, it wasn’t by much. Cumulatively, through this week, it has been a 122% differential (up 52% for value vs up 174% for growth). This appears to be the longest and most severe drought for value investors since data collection began. It will go our way eventually as there are too many people paying far too much for today’s darlings, both public and private. Further, the ten-year yield of 2.5% (pre-tax) isn’t attractive nor is real estate. We believe the value part of the global equity market is the only place to earn solid risk adjusted returns and we believe those returns will be higher than normal,” said Vilas Fund in its Q1 investor letter. We aren’t sure whether value stocks outperform growth, but we follow hedge fund investor letters to understand where the markets and stocks might be going. This article will lay out and discuss the hedge fund and institutional investor sentiment towards MasTec, Inc. (NYSE:MTZ).
Is MasTec, Inc. (NYSE:MTZ) a buy, sell, or hold? Hedge funds are becoming hopeful. The number of bullish hedge fund bets increased by 4 lately. Our calculations also showed that MTZ isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
William Harnisch of Peconic Partners LLC
Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s analyze the recent hedge fund action encompassing MasTec, Inc. (NYSE:MTZ).
Hedge fund activity in MasTec, Inc. (NYSE:MTZ)
At the end of the third quarter, a total of 32 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MTZ over the last 17 quarters. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).
More specifically, AQR Capital Management was the largest shareholder of MasTec, Inc. (NYSE:MTZ), with a stake worth $28.5 million reported as of the end of September. Trailing AQR Capital Management was Alyeska Investment Group, which amassed a stake valued at $23.7 million. Billings Capital Management, Citadel Investment Group, and Peconic Partners 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 Billings Capital Management allocated the biggest weight to MasTec, Inc. (NYSE:MTZ), around 23.27% of its portfolio. Southport Management is also relatively very bullish on the stock, designating 8.22 percent of its 13F equity portfolio to MTZ.
As aggregate interest increased, some big names were leading the bulls’ herd. D E Shaw, managed by David E. Shaw, created the largest position in MasTec, Inc. (NYSE:MTZ). D E Shaw had $9.2 million invested in the company at the end of the quarter. Paul Tudor Jones’s Tudor Investment Corp also initiated a $3.5 million position during the quarter. The following funds were also among the new MTZ investors: Frederick DiSanto’s Ancora Advisors, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, and Mike Vranos’s Ellington.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as MasTec, Inc. (NYSE:MTZ) but similarly valued. These stocks are Churchill Downs Incorporated (NASDAQ:CHDN), MAXIMUS, Inc. (NYSE:MMS), Millicom International Cellular S.A. (NASDAQ:TIGO), and Life Storage, Inc. (NYSE:LSI). This group of stocks’ market values match MTZ’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CHDN | 25 | 720523 | 0 |
| MMS | 23 | 223777 | 1 |
| TIGO | 6 | 96480 | 1 |
| LSI | 15 | 226876 | -5 |
| Average | 17.25 | 316914 | -0.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $317 million. That figure was $208 million in MTZ’s case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks MasTec, Inc. (NYSE:MTZ) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately MTZ wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MTZ were disappointed as the stock returned 2.2% during the first two months of the fourth quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 70 percent of these stocks already outperformed the market in Q4.
Disclosure: None. This article was originally published at Insider Monkey.
