Were Hedge Funds Right About Piling Into Mastercard (MA)?

In this article we will analyze whether Mastercard Incorporated (NYSE:MA) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Mastercard Incorporated (NYSE:MA) investors should pay attention to an increase in hedge fund interest in recent months. Mastercard Incorporated (NYSE:MA) was in 154 hedge funds’ portfolios at the end of December. The all time high for this statistic was previously 147. This means the bullish number of hedge fund positions in this stock reached a brand new all time high. Our calculations also showed that MA raked #8 among the 30 most popular stocks among hedge funds (click for Q4 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here).

Warren Buffett of Berkshire Hathaway

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. Keeping this in mind we’re going to take a look at the latest hedge fund action regarding Mastercard Incorporated (NYSE:MA).

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

At Q4’s end, a total of 154 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 16% from the third quarter of 2020. On the other hand, there were a total of 125 hedge funds with a bullish position in MA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mastercard Incorporated (NYSE:MA) was held by Akre Capital Management, which reported holding $2098.9 million worth of stock at the end of December. It was followed by Berkshire Hathaway with a $1629.3 million position. Other investors bullish on the company included Gardner Russo & Gardner, Fisher Asset Management, and Melvin Capital Management. In terms of the portfolio weights assigned to each position Valley Forge Capital allocated the biggest weight to Mastercard Incorporated (NYSE:MA), around 22.43% of its 13F portfolio. VGI Partners is also relatively very bullish on the stock, designating 19.77 percent of its 13F equity portfolio to MA.

As aggregate interest increased, specific money managers have jumped into Mastercard Incorporated (NYSE:MA) headfirst. Point72 Asset Management, managed by Steve Cohen, created the largest position in Mastercard Incorporated (NYSE:MA). Point72 Asset Management had $105.8 million invested in the company at the end of the quarter. James Parsons’s Junto Capital Management also made a $95.3 million investment in the stock during the quarter. The following funds were also among the new MA investors: Alexander Mitchell’s Scopus Asset Management, Brandon Haley’s Holocene Advisors, and Chris Rokos’s Rokos Capital Management.

Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Mastercard Incorporated (NYSE:MA) but similarly valued. We will take a look at The Procter & Gamble Company (NYSE:PG), UnitedHealth Group Inc. (NYSE:UNH), The Walt Disney Company (NYSE:DIS), NVIDIA Corporation (NASDAQ:NVDA), The Home Depot, Inc. (NYSE:HD), Paypal Holdings Inc (NASDAQ:PYPL), and Bank of America Corporation (NYSE:BAC). This group of stocks’ market values are closest to MA’s market value.

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As you can see these stocks had an average of 104.4 hedge funds with bullish positions and the average amount invested in these stocks was $14648 million. That figure was $17979 million in MA’s case. Paypal Holdings Inc (NASDAQ:PYPL) is the most popular stock in this table. On the other hand The Home Depot, Inc. (NYSE:HD) is the least popular one with only 79 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 96.5. 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 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Unfortunately MA wasn’t nearly as successful as these 30 stocks and hedge funds that were betting on MA were disappointed as the stock returned 7.3% since the end of the fourth quarter (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the more diversified list of the top 30 most popular stocks among hedge funds as most of these stocks already outperformed the market since 2019.

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

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