Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The last 12 months is one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 10 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of Mattel, Inc. (NASDAQ:MAT).
Is Mattel, Inc. (NASDAQ:MAT) ready to rally soon? Money managers are buying. The number of long hedge fund bets inched up by 6 recently. Our calculations also showed that MAT 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.
Mason Hawkins of Southeastern Asset Management
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 take a look at the key hedge fund action encompassing Mattel, Inc. (NASDAQ:MAT).
How are hedge funds trading Mattel, Inc. (NASDAQ:MAT)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 38% from the previous quarter. By comparison, 16 hedge funds held shares or bullish call options in MAT a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Southeastern Asset Management was the largest shareholder of Mattel, Inc. (NASDAQ:MAT), with a stake worth $386.5 million reported as of the end of September. Trailing Southeastern Asset Management was Ariel Investments, which amassed a stake valued at $175.1 million. Jericho Capital Asset Management, Citadel Investment Group, and Carlson Capital 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 Southeastern Asset Management allocated the biggest weight to Mattel, Inc. (NASDAQ:MAT), around 6.74% of its 13F portfolio. Jericho Capital Asset Management is also relatively very bullish on the stock, designating 2.48 percent of its 13F equity portfolio to MAT.
Consequently, specific money managers were leading the bulls’ herd. Carlson Capital, managed by Clint Carlson, assembled the largest position in Mattel, Inc. (NASDAQ:MAT). Carlson Capital had $9.5 million invested in the company at the end of the quarter. David E. Shaw’s D E Shaw also made a $6 million investment in the stock during the quarter. The following funds were also among the new MAT investors: Brandon Haley’s Holocene Advisors, Steve Cohen’s Point72 Asset Management, and Joe DiMenna’s ZWEIG DIMENNA PARTNERS.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mattel, Inc. (NASDAQ:MAT) but similarly valued. These stocks are Sinclair Broadcast Group, Inc. (NASDAQ:SBGI), Shake Shack Inc (NYSE:SHAK), Cracker Barrel Old Country Store, Inc. (NASDAQ:CBRL), and Penske Automotive Group, Inc. (NYSE:PAG). This group of stocks’ market caps are closest to MAT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SBGI | 29 | 467906 | -7 |
| SHAK | 26 | 607030 | -1 |
| CBRL | 21 | 240229 | -1 |
| PAG | 16 | 63851 | -1 |
| Average | 23 | 344754 | -2.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23 hedge funds with bullish positions and the average amount invested in these stocks was $345 million. That figure was $685 million in MAT’s case. Sinclair Broadcast Group, Inc. (NASDAQ:SBGI) is the most popular stock in this table. On the other hand Penske Automotive Group, Inc. (NYSE:PAG) is the least popular one with only 16 bullish hedge fund positions. Mattel, Inc. (NASDAQ:MAT) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 MAT wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); MAT investors were disappointed as the stock returned 2.7% 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.
