Were Hedge Funds Right About Crowding Into Marvell Technology Group Ltd. (MRVL)?

Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 823 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Marvell Technology Group Ltd. (NASDAQ:MRVL).

Is Marvell Technology Group Ltd. (NASDAQ:MRVL) a buy right now? Money managers were betting on the stock. The number of bullish hedge fund bets moved up by 12 recently. Marvell Technology Group Ltd. (NASDAQ:MRVL) was in 41 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 50. Our calculations also showed that MRVL isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 29 hedge funds in our database with MRVL holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

If you’d ask most stock holders, hedge funds are viewed as slow, old financial tools of yesteryear. While there are over 8000 funds trading at the moment, We hone in on the moguls of this club, about 850 funds. These investment experts have their hands on most of the hedge fund industry’s total capital, and by keeping track of their finest investments, Insider Monkey has unearthed many investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Israel Englander of Millennium Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 to get excerpts of these letters in your inbox. Now let’s go over the new hedge fund action surrounding Marvell Technology Group Ltd. (NASDAQ:MRVL).

How have hedgies been trading Marvell Technology Group Ltd. (NASDAQ:MRVL)?

At the end of the second quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 41% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MRVL over the last 20 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Marvell Technology Group Ltd. (NASDAQ:MRVL) was held by Citadel Investment Group, which reported holding $146.3 million worth of stock at the end of September. It was followed by Holocene Advisors with a $143.5 million position. Other investors bullish on the company included Citadel Investment Group, Fisher Asset Management, and Millennium Management. In terms of the portfolio weights assigned to each position Crosslink Capital allocated the biggest weight to Marvell Technology Group Ltd. (NASDAQ:MRVL), around 3.67% of its 13F portfolio. Cavalry Asset Management is also relatively very bullish on the stock, designating 3.34 percent of its 13F equity portfolio to MRVL.

Now, some big names were leading the bulls’ herd. Renaissance Technologies, founded by Jim Simons, created the most outsized position in Marvell Technology Group Ltd. (NASDAQ:MRVL). Renaissance Technologies had $33 million invested in the company at the end of the quarter. David Fiszel’s Honeycomb Asset Management also made a $14 million investment in the stock during the quarter. The following funds were also among the new MRVL investors: Dmitry Balyasny’s Balyasny Asset Management, Donald Sussman’s Paloma Partners, and Robert Joseph Caruso’s Select Equity Group.

Let’s now take a look at hedge fund activity in other stocks similar to Marvell Technology Group Ltd. (NASDAQ:MRVL). These stocks are American Water Works Company, Inc. (NYSE:AWK), XP Inc. (NASDAQ:XP), Williams Companies, Inc. (NYSE:WMB), Ecopetrol S.A. (NYSE:EC), Fortive Corporation (NYSE:FTV), China Telecom Corporation Limited (NYSE:CHA), and Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA). All of these stocks’ market caps resemble MRVL’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22 hedge funds with bullish positions and the average amount invested in these stocks was $462 million. That figure was $665 million in MRVL’s case. Williams Companies, Inc. (NYSE:WMB) is the most popular stock in this table. On the other hand China Telecom Corporation Limited (NYSE:CHA) is the least popular one with only 5 bullish hedge fund positions. Marvell Technology Group Ltd. (NASDAQ:MRVL) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MRVL is 84.6. 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 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 30% in 2020 through October 23rd and still beat the market by 21 percentage points. Hedge funds were also right about betting on MRVL as the stock returned 18.5% since the end of Q2 (through 10/23) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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