We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. We at Insider Monkey have gone over 835 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of December 31st. In this article, we look at what those funds think of Mattel, Inc. (NASDAQ:MAT) based on that data.
Is Mattel, Inc. (NASDAQ:MAT) a bargain? The smart money is taking a pessimistic view. The number of bullish hedge fund bets were trimmed by 5 in recent months. Our calculations also showed that MAT isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings). MAT was in 19 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 24 hedge funds in our database with MAT positions at the end of the previous quarter.
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 was able to identify in advance a select group of hedge fund holdings that 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.
Mason Hawkins of Southeastern Asset Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action surrounding Mattel, Inc. (NASDAQ:MAT).
What does smart money think about Mattel, Inc. (NASDAQ:MAT)?
At Q4’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -21% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MAT over the last 18 quarters. So, let’s see 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 $444.2 million reported as of the end of September. Trailing Southeastern Asset Management was Ariel Investments, which amassed a stake valued at $207.4 million. Renaissance Technologies, D E Shaw, and Schonfeld Strategic Advisors 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 7.4% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, earmarking 2.6 percent of its 13F equity portfolio to MAT.
Seeing as Mattel, Inc. (NASDAQ:MAT) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there exists a select few funds that slashed their entire stakes heading into Q4. At the top of the heap, Josh Resnick’s Jericho Capital Asset Management sold off the largest position of all the hedgies followed by Insider Monkey, worth about $43.5 million in stock. Brandon Haley’s fund, Holocene Advisors, also cut its stock, about $2.6 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest fell by 5 funds heading into Q4.
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 Wyndham Destinations, Inc. (NYSE:WYND), Micro Focus Intl PLC (NYSE:MFGP), Assured Guaranty Ltd. (NYSE:AGO), and W.R. Grace & Co. (NYSE:GRA). This group of stocks’ market values are similar to MAT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| WYND | 28 | 394113 | 5 |
| MFGP | 11 | 36197 | 3 |
| AGO | 33 | 586688 | -5 |
| GRA | 46 | 1719576 | 3 |
| Average | 29.5 | 684144 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $684 million. That figure was $739 million in MAT’s case. W.R. Grace & Co. (NYSE:GRA) is the most popular stock in this table. On the other hand Micro Focus Intl PLC (NYSE:MFGP) is the least popular one with only 11 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 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 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 -37% during the same time period 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 most of these stocks already outperformed the market in Q1.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
