Is MAT Stock A Buy or Sell?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Mattel, Inc. (NASDAQ:MAT) to find out whether there were any major changes in hedge funds’ views.

Is MAT stock a buy? Mattel, Inc. (NASDAQ:MAT) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Mattel, Inc. (NASDAQ:MAT) was in 25 hedge funds’ portfolios at the end of December. The all time high for this statistic is 37. Our calculations also showed that MAT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings).

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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Ken Griffin of Citadel Investment Group

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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 we’re going to take a peek at the fresh hedge fund action encompassing Mattel, Inc. (NASDAQ:MAT).

Do Hedge Funds Think MAT Is A Good Stock To Buy Now?

At the end of the fourth quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -4% from the third quarter of 2020. On the other hand, there were a total of 19 hedge funds with a bullish position in MAT 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.

Of the funds tracked by Insider Monkey, Southeastern Asset Management, managed by Mason Hawkins, holds the biggest position in Mattel, Inc. (NASDAQ:MAT). Southeastern Asset Management has a $303.9 million position in the stock, comprising 6.8% of its 13F portfolio. On Southeastern Asset Management’s heels is Ariel Investments, led by John W. Rogers, holding a $277.9 million position; the fund has 3.1% of its 13F portfolio invested in the stock. Some other professional money managers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, Ken Griffin’s Citadel Investment Group and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Mattel, Inc. (NASDAQ:MAT), around 6.79% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, setting aside 3.62 percent of its 13F equity portfolio to MAT.

Seeing as Mattel, Inc. (NASDAQ:MAT) has witnessed bearish sentiment from the aggregate hedge fund industry, logic holds that there were a few hedge funds who sold off their positions entirely in the fourth quarter. It’s worth mentioning that Alexander Mitchell’s Scopus Asset Management cut the biggest stake of the “upper crust” of funds monitored by Insider Monkey, worth about $17.6 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $5.9 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 1 funds in the fourth quarter.

Let’s go over hedge fund activity in other stocks similar to Mattel, Inc. (NASDAQ:MAT). These stocks are Devon Energy Corporation (NYSE:DVN), Western Alliance Bancorporation (NYSE:WAL), Targa Resources Corp (NYSE:TRGP), LG Display Co Ltd. (NYSE:LPL), Shift4 Payments, Inc. (NYSE:FOUR), Phillips 66 Partners LP (NYSE:PSXP), and PLDT Inc. (NYSE:PHI). This group of stocks’ market caps are closest to MAT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.3 hedge funds with bullish positions and the average amount invested in these stocks was $289 million. That figure was $859 million in MAT’s case. Devon Energy Corporation (NYSE:DVN) is the most popular stock in this table. On the other hand Phillips 66 Partners LP (NYSE:PSXP) is the least popular one with only 4 bullish hedge fund positions. Mattel, Inc. (NASDAQ:MAT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MAT is 49.9. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on MAT as the stock returned 19.4% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

Disclosure: None. This article was originally published at Insider Monkey.