Was The Smart Money Right About Mattel, Inc. (MAT)?

Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks initially suffered the most but many of these stocks delivered strong returns since November and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment towards Mattel, Inc. (NASDAQ:MAT) changed recently.

Hedge fund interest in Mattel, Inc. (NASDAQ:MAT) shares was flat at the end of last quarter. This is usually a negative indicator. Our calculations also showed that MAT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). 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 First Financial Bankshares Inc (NASDAQ:FFIN), Cabot Oil & Gas Corporation (NYSE:COG), and Envista Holdings Corporation (NYSE:NVST) to gather more data points.

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 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman of GLG Partners

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Keeping this in mind we’re going to take a look at the recent hedge fund action surrounding Mattel, Inc. (NASDAQ:MAT).

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

At the end of the second quarter, a total of 25 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from the previous quarter. On the other hand, there were a total of 25 hedge funds with a bullish position in MAT a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Southeastern Asset Management, managed by Mason Hawkins, holds the most valuable position in Mattel, Inc. (NASDAQ:MAT). Southeastern Asset Management has a $381.7 million position in the stock, comprising 7.7% of its 13F portfolio. Sitting at the No. 2 spot is John W. Rogers of Ariel Investments, with a $314 million position; the fund has 3% of its 13F portfolio invested in the stock. Some other professional money managers with similar optimism include Ken Griffin’s Citadel Investment Group, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Mattel, Inc. (NASDAQ:MAT), around 7.67% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, designating 2.95 percent of its 13F equity portfolio to MAT.

Since Mattel, Inc. (NASDAQ:MAT) has experienced falling interest from hedge fund managers, it’s safe to say that there were a few money managers that slashed their full holdings heading into Q3. It’s worth mentioning that Thyra Zerhusen’s Fairpointe Capital dropped the biggest position of the 750 funds followed by Insider Monkey, totaling close to $4.2 million in stock, and Greg Eisner’s Engineers Gate Manager was right behind this move, as the fund dropped about $1.1 million worth. These moves are intriguing to say the least, 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 similar to Mattel, Inc. (NASDAQ:MAT). These stocks are First Financial Bankshares Inc (NASDAQ:FFIN), Cabot Oil & Gas Corporation (NYSE:COG), Envista Holdings Corporation (NYSE:NVST), Pacific Biosciences of California (NASDAQ:PACB), BanColombia S.A. (NYSE:CIB), BlackBerry Limited (NYSE:BB), and Leggett & Platt, Inc. (NYSE:LEG). This group of stocks’ market valuations match MAT’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.4 hedge funds with bullish positions and the average amount invested in these stocks was $580 million. That figure was $929 million in MAT’s case. Envista Holdings Corporation (NYSE:NVST) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 3 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 56.7. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 29.6% in 2021 through November 5th and still beat the market by 3.1 percentage points. Hedge funds were also right about betting on MAT as the stock returned 8.1% since the end of Q2 (through 11/5) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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