Were Hedge Funds Right About Mastercard Incorporated (MA)?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value 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 Mastercard Incorporated (NYSE:MA) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Mastercard Incorporated (NYSE:MA) shareholders have witnessed a decrease in hedge fund interest recently. Mastercard Incorporated (NYSE:MA) was in 146 hedge funds’ portfolios at the end of September. The all time high for this statistic is 156. Our calculations also showed that MA ranked #6 among the 30 most popular stocks among hedge funds (click for Q3 rankings).

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 review the recent hedge fund action encompassing Mastercard Incorporated (NYSE:MA).

Charles Akre of Akre Capital Management

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

At the end of September, a total of 146 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -6% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards MA over the last 25 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

More specifically, Akre Capital Management was the largest shareholder of Mastercard Incorporated (NYSE:MA), with a stake worth $2036.9 million reported as of the end of September. Trailing Akre Capital Management was Fisher Asset Management, which amassed a stake valued at $1532.2 million. Berkshire Hathaway, Gardner Russo & Gardner, and Citadel Investment Group 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 Valley Forge Capital allocated the biggest weight to Mastercard Incorporated (NYSE:MA), around 19.08% of its 13F portfolio. KG Funds Management is also relatively very bullish on the stock, designating 17.06 percent of its 13F equity portfolio to MA.

Since Mastercard Incorporated (NYSE:MA) has experienced falling interest from the smart money, it’s safe to say that there was a specific group of funds that elected to cut their full holdings heading into Q4. At the top of the heap, Lone Pine Capital said goodbye to the largest stake of the 750 funds followed by Insider Monkey, valued at about $658.5 million in stock, and Mick Hellman’s HMI Capital was right behind this move, as the fund cut about $188 million worth. These moves are interesting, as total hedge fund interest dropped by 10 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Mastercard Incorporated (NYSE:MA). These stocks are The Procter & Gamble Company (NYSE:PG), ASML Holding N.V. (NASDAQ:ASML), The Walt Disney Company (NYSE:DIS), Paypal Holdings Inc (NASDAQ:PYPL), Adobe Inc. (NASDAQ:ADBE), Netflix, Inc. (NASDAQ:NFLX), and salesforce.com, inc. (NYSE:CRM). All of these stocks’ market caps resemble MA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 93.4 hedge funds with bullish positions and the average amount invested in these stocks was $10845 million. That figure was $17660 million in MA’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand ASML Holding N.V. (NASDAQ:ASML) is the least popular one with only 41 bullish hedge fund positions. Compared to these stocks Mastercard Incorporated (NYSE:MA) is more popular among hedge funds. Our overall hedge fund sentiment score for MA is 95.6. 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 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 returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on MA as the stock returned 11.4% since the end of September (through 1/31) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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