Hedge fund managers like David Einhorn, Dan Loeb, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: MasTec, Inc. (NYSE:MTZ).
Is MasTec, Inc. (NYSE:MTZ) a superb stock to buy now? Prominent investors are betting on the stock. The number of bullish hedge fund bets moved up by 8 lately. Our calculations also showed that MTZ isn’t among the 30 most popular stocks among hedge funds. MTZ was in 30 hedge funds’ portfolios at the end of September. There were 22 hedge funds in our database with MTZ holdings at the end of the previous quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the key hedge fund action regarding MasTec, Inc. (NYSE:MTZ).
Hedge fund activity in MasTec, Inc. (NYSE:MTZ)
At the end of the third quarter, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 36% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in MTZ over the last 13 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Peconic Partners LLC was the largest shareholder of MasTec, Inc. (NYSE:MTZ), with a stake worth $191 million reported as of the end of September. Trailing Peconic Partners LLC was Point72 Asset Management, which amassed a stake valued at $106.1 million. Alyeska Investment Group, SG Capital Management, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
As one would reasonably expect, some big names have been driving this bullishness. Carlson Capital, managed by Clint Carlson, initiated the biggest position in MasTec, Inc. (NYSE:MTZ). Carlson Capital had $22.3 million invested in the company at the end of the quarter. Robert Boucai’s Newbrook Capital Advisors also initiated a $22.3 million position during the quarter. The other funds with brand new MTZ positions are Israel Englander’s Millennium Management, Ian Simm’s Impax Asset Management, and Eric F. Billings’s Billings Capital Management.
Let’s also examine hedge fund activity in other stocks similar to MasTec, Inc. (NYSE:MTZ). These stocks are Regal Beloit Corporation (NYSE:RBC), Deckers Outdoor Corp (NASDAQ:DECK), Kennametal Inc. (NYSE:KMT), and Liberty Latin America Ltd. (NASDAQ:LILA). This group of stocks’ market caps are closest to MTZ’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RBC | 17 | 114508 | 4 |
| DECK | 22 | 284198 | 2 |
| KMT | 21 | 438773 | 3 |
| LILA | 11 | 121142 | -3 |
| Average | 17.75 | 239655 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $240 million. That figure was $653 million in MTZ’s case. Deckers Outdoor Corp (NASDAQ:DECK) is the most popular stock in this table. On the other hand Liberty Latin America Ltd. (NASDAQ:LILA) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks MasTec, Inc. (NYSE:MTZ) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
