Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Mastercard Incorporated (NYSE:MA)? The smart money sentiment can provide an answer to this question.
Is Mastercard Incorporated (NYSE:MA) the right investment to pursue these days? The best stock pickers were reducing their bets on the stock. The number of bullish hedge fund bets decreased by 14 recently. Mastercard Incorporated (NYSE:MA) was in 133 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistics is 147. Our calculations also showed that MA now ranks 10th among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are many signals stock market investors have at their disposal to size up publicly traded companies. A duo of the most underrated signals are hedge fund and insider trading signals. Our researchers have shown that, historically, those who follow the best picks of the top hedge fund managers can trounce the broader indices by a solid amount (see the details here).
William Harnisch of Peconic Partners LLC
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website. With all of this in mind let’s review the latest hedge fund action surrounding Mastercard Incorporated (NYSE:MA).
What have hedge funds been doing with Mastercard Incorporated (NYSE:MA)?
Heading into the fourth quarter of 2020, a total of 133 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -10% from one quarter earlier. On the other hand, there were a total of 125 hedge funds with a bullish position in MA 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.
According to Insider Monkey’s hedge fund database, Charles Akre’s Akre Capital Management has the number one position in Mastercard Incorporated (NYSE:MA), worth close to $1.989 billion, amounting to 14% of its total 13F portfolio. Coming in second is Gardner Russo & Gardner, managed by Tom Russo, which holds a $1.6541 billion position; the fund has 16.1% of its 13F portfolio invested in the stock. Remaining peers that hold long positions encompass Warren Buffett’s Berkshire Hathaway, Ken Fisher’s Fisher Asset Management and Rajiv Jain’s GQG Partners. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to Mastercard Incorporated (NYSE:MA), around 26.96% of its 13F portfolio. KG Funds Management is also relatively very bullish on the stock, setting aside 18.76 percent of its 13F equity portfolio to MA.
Due to the fact that Mastercard Incorporated (NYSE:MA) has faced bearish sentiment from the smart money, logic holds that there were a few funds that elected to cut their full holdings heading into Q44. Interestingly, Renaissance Technologies sold off the biggest position of the 750 funds monitored by Insider Monkey, worth about $74 million in stock, and Tim Hurd and Ed Magnus’s BlueSpruce Investments was right behind this move, as the fund sold off about $64.8 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 14 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mastercard Incorporated (NYSE:MA) but similarly valued. These stocks are NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), UnitedHealth Group Inc. (NYSE:UNH), JPMorgan Chase & Co. (NYSE:JPM), Verizon Communications Inc. (NYSE:VZ), Adobe Inc. (NASDAQ:ADBE), and Paypal Holdings Inc (NASDAQ:PYPL). All of these stocks’ market caps resemble MA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NVDA | 82 | 7672045 | -10 |
| HD | 73 | 4957355 | -12 |
| UNH | 89 | 8963458 | -7 |
| JPM | 118 | 6058434 | -5 |
| VZ | 65 | 2759911 | -3 |
| ADBE | 106 | 10503167 | 2 |
| PYPL | 150 | 11476857 | 6 |
| Average | 97.6 | 7484461 | -4.1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 97.6 hedge funds with bullish positions and the average amount invested in these stocks was $7484 million. That figure was $15646 million in MA’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand Verizon Communications Inc. (NYSE:VZ) is the least popular one with only 65 bullish hedge fund positions. Mastercard Incorporated (NYSE:MA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MA is 88.1. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 28.1% in 2020 through November 23rd and beat the market again by 15.4 percentage points. Unfortunately MA wasn’t nearly as successful as these 20 stocks and hedge funds that were betting on MA were disappointed as the stock lost 1.7% since the end of September (through 11/23) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
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Disclosure: None. This article was originally published at Insider Monkey.
