We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Mattel, Inc. (NASDAQ:MAT) and determine whether hedge funds skillfully traded this stock.
Is Mattel, Inc. (NASDAQ:MAT) going to take off soon? Investors who are in the know were becoming more confident. The number of long hedge fund positions went up by 8 recently. Mattel, Inc. (NASDAQ:MAT) was in 25 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 37. Our calculations also showed that MAT 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. With all of this in mind we’re going to take a peek at the new hedge fund action regarding Mattel, Inc. (NASDAQ:MAT).
What does smart money think about Mattel, Inc. (NASDAQ:MAT)?
At second quarter’s end, a total of 25 of the hedge funds tracked by Insider Monkey were long this stock, a change of 47% from one quarter earlier. By comparison, 16 hedge funds held shares or bullish call options in MAT a year ago. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were boosting their stakes substantially (or already accumulated large positions).
The largest stake in Mattel, Inc. (NASDAQ:MAT) was held by Southeastern Asset Management, which reported holding $282 million worth of stock at the end of September. It was followed by Ariel Investments with a $171 million position. Other investors bullish on the company included Arrowstreet Capital, Citadel Investment Group, and Fairpointe Capital. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Mattel, Inc. (NASDAQ:MAT), around 7.03% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, setting aside 3.62 percent of its 13F equity portfolio to MAT.
As one would reasonably expect, specific money managers have jumped into Mattel, Inc. (NASDAQ:MAT) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, established the most outsized position in Mattel, Inc. (NASDAQ:MAT). Arrowstreet Capital had $38.8 million invested in the company at the end of the quarter. Thyra Zerhusen’s Fairpointe Capital also initiated a $24.8 million position during the quarter. The other funds with new positions in the stock are David Andre and Astro Teller’s Cerebellum Capital, Lee Ainslie’s Maverick Capital, and Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management.
Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Mattel, Inc. (NASDAQ:MAT) but similarly valued. These stocks are Cosan Limited (NYSE:CZZ), Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH), Clean Harbors Inc (NYSE:CLH), PTC Therapeutics, Inc. (NASDAQ:PTCT), Air Lease Corp (NYSE:AL), PennyMac Financial Services Inc (NYSE:PFSI), and ADC Therapeutics SA (NYSE:ADCT). All of these stocks’ market caps resemble MAT’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
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As you can see these stocks had an average of 22.4 hedge funds with bullish positions and the average amount invested in these stocks was $414 million. That figure was $595 million in MAT’s case. Deciphera Pharmaceuticals, Inc. (NASDAQ:DCPH) is the most popular stock in this table. On the other hand Cosan Limited (NYSE:CZZ) is the least popular one with only 14 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 62.6. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on MAT as the stock returned 17.2% during Q3 (through September 25th) 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.