Coronavirus is probably the #1 concern in investors’ minds right now. It should be. We estimate that COVID-19 will kill around 5 million people worldwide and there is a 3.3% probability that Donald Trump will die from the new coronavirus (read the details.). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter. One of these stocks was Mastercard Incorporated (NYSE:MA).
Mastercard Incorporated (NYSE:MA) shares haven’t seen a lot of action during the fourth quarter. Overall, hedge fund sentiment was unchanged and stood at its all time high. The stock was in 125 hedge funds’ portfolios at the end of December. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as Exxon Mobil Corporation (NYSE:XOM), AT&T Inc. (NYSE:T), and UnitedHealth Group Inc. (NYSE:UNH) to gather more data points. Our calculations also showed that MA ranked 9th among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by more than 41 percentage points since March 2017 (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 35.3% through March 3rd. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Warren Buffett of Berkshire Hathaway
We leave no stone unturned when looking for the next great investment idea. For example this gold mining company is acquiring gold mines in Americas at a fraction of the cost of drilling them, so we look into its viability. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned nearly 50% despite the large losses in the market since our recommendation. Keeping this in mind we’re going to review the key hedge fund action regarding Mastercard Incorporated (NYSE:MA).
How are hedge funds trading Mastercard Incorporated (NYSE:MA)?
At Q4’s end, a total of 125 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 0% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MA over the last 18 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Mastercard Incorporated (NYSE:MA) was held by Gardner Russo & Gardner, which reported holding $1905.1 million worth of stock at the end of September. It was followed by Akre Capital Management with a $1590.5 million position. Other investors bullish on the company included Berkshire Hathaway, Arrowstreet Capital, and GQG Partners. In terms of the portfolio weights assigned to each position KG Funds Management allocated the biggest weight to Mastercard Incorporated (NYSE:MA), around 16.24% of its 13F portfolio. Gardner Russo & Gardner is also relatively very bullish on the stock, earmarking 14.61 percent of its 13F equity portfolio to MA.
Because Mastercard Incorporated (NYSE:MA) has experienced bearish sentiment from the smart money, we can see that there is a sect of funds that slashed their positions entirely last quarter. At the top of the heap, Glen Kacher’s Light Street Capital cut the biggest position of the 750 funds monitored by Insider Monkey, worth an estimated $42.1 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $32.8 million worth. These moves are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Mastercard Incorporated (NYSE:MA) but similarly valued. These stocks are Exxon Mobil Corporation (NYSE:XOM), AT&T Inc. (NYSE:T), UnitedHealth Group Inc. (NYSE:UNH), and The Walt Disney Company (NYSE:DIS). This group of stocks’ market caps are closest to MA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| XOM | 63 | 2028251 | 8 |
| T | 50 | 1406918 | -1 |
| UNH | 91 | 7896286 | 3 |
| DIS | 118 | 4968497 | 3 |
| Average | 80.5 | 4074988 | 3.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 80.5 hedge funds with bullish positions and the average amount invested in these stocks was $4075 million. That figure was $14561 million in MA’s case. The Walt Disney Company (NYSE:DIS) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 50 bullish hedge fund positions. Compared to these stocks Mastercard Incorporated (NYSE:MA) is more popular among hedge funds. 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 10.1 percentage points. These stocks also gained 0.1% in 2020 through March 2nd and beat the market by 4.1 percentage points. Hedge funds were also right about betting on MA as the stock returned 2.9% so far in Q1 (through March 2nd) 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.
Disclosure: None. This article was originally published at Insider Monkey.
