Were Expert Investors Right About McAfee Corp. (MCFE)?

Technology stocks had a lousy start to 2022. QQQ lost 9% of its value in January. Pandemic winners are getting crushed while energy stocks are surging. Roblox lost 36%, Moderna lost 33%, and Carvana and Shopify lost 30% of their values in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards McAfee Corp. (NASDAQ:MCFE) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is McAfee Corp. (NASDAQ:MCFE) a healthy stock for your portfolio? The best stock pickers were getting more optimistic. The number of long hedge fund positions went up by 13 in recent months. McAfee Corp. (NASDAQ:MCFE) was in 31 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic was previously 20. This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MCFE isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 18 hedge funds in our database with MCFE positions at the end of the second quarter.

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 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. With all of this in mind we’re going to check out the key hedge fund action encompassing McAfee Corp. (NASDAQ:MCFE).

Ryan Tolkin, CIO of Schonfeld Strategic Advisors

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

At third quarter’s end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of 72% from one quarter earlier. On the other hand, there were a total of 0 hedge funds with a bullish position in MCFE a year ago. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Ken Griffin’s Citadel Investment Group has the largest position in McAfee Corp. (NASDAQ:MCFE), worth close to $48 million, accounting for less than 0.1%% of its total 13F portfolio. The second most bullish fund manager is Indaba Capital Management, managed by Derek C. Schrier, which holds a $36.5 million position; 3.9% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism consist of Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors, Seth Rosen’s Nitorum Capital and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Yarra Square Partners allocated the biggest weight to McAfee Corp. (NASDAQ:MCFE), around 7.86% of its 13F portfolio. Indaba Capital Management is also relatively very bullish on the stock, designating 3.86 percent of its 13F equity portfolio to MCFE.

As aggregate interest increased, key money managers have jumped into McAfee Corp. (NASDAQ:MCFE) headfirst. Indaba Capital Management, managed by Derek C. Schrier, assembled the most outsized position in McAfee Corp. (NASDAQ:MCFE). Indaba Capital Management had $36.5 million invested in the company at the end of the quarter. Seth Rosen’s Nitorum Capital also made a $30.5 million investment in the stock during the quarter. The following funds were also among the new MCFE investors: Michael Platt and William Reeves’s BlueCrest Capital Mgmt., Tor Minesuk’s Mondrian Capital, and Steve Cohen’s Point72 Asset Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as McAfee Corp. (NASDAQ:MCFE) but similarly valued. These stocks are CyrusOne Inc (NASDAQ:CONE), Lithia Motors Inc (NYSE:LAD), Amdocs Limited (NASDAQ:DOX), NiSource Inc. (NYSE:NI), TFI International Inc. (NYSE:TFII), The Middleby Corporation (NASDAQ:MIDD), and Altice USA, Inc. (NYSE:ATUS). All of these stocks’ market caps are closest to MCFE’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 35.7 hedge funds with bullish positions and the average amount invested in these stocks was $941 million. That figure was $331 million in MCFE’s case. Lithia Motors Inc (NYSE:LAD) is the most popular stock in this table. On the other hand TFI International Inc. (NYSE:TFII) is the least popular one with only 23 bullish hedge fund positions. McAfee Corp. (NASDAQ:MCFE) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MCFE is 49.8. 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 and still beat the market by 3.6 percentage points. A small number of hedge funds were also right about betting on MCFE as the stock returned 16% since the end of the third quarter (through 1/31) and outperformed the market by an even larger margin.

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