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Hedge Funds Have Never Been This Bullish On Masco Corporation (MAS)

We are still in an overall bull market and many stocks that smart money investors were piling into surged through November 22nd. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 52% and 49% respectively. Hedge funds’ top 3 stock picks returned 39.1% this year and beat the S&P 500 ETFs by nearly 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That’s why we believe it isn’t a waste of time to check out hedge fund sentiment before you invest in a stock like Masco Corporation (NYSE:MAS).

Is Masco Corporation (NYSE:MAS) worth your attention right now? Money managers are becoming more confident. The number of long hedge fund positions rose by 1 in recent months. Our calculations also showed that MAS isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Noam Gottesman GLG Partners

Noam Gottesman of GLG Partners

Unlike the largest US hedge funds that are convinced Dow will soar past 40,000 or the world’s most bearish hedge fund that’s more convinced than ever that a crash is coming, our long-short investment strategy doesn’t rely on bull or bear markets to deliver double digit returns. We only rely on the best performing hedge funds‘ buy/sell signals. Let’s take a peek at the fresh hedge fund action encompassing Masco Corporation (NYSE:MAS).

What have hedge funds been doing with Masco Corporation (NYSE:MAS)?

At the end of the third quarter, a total of 46 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. On the other hand, there were a total of 35 hedge funds with a bullish position in MAS a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of notable hedge fund managers who were adding to their stakes substantially (or already accumulated large positions).

MAS_nov2019

The largest stake in Masco Corporation (NYSE:MAS) was held by Two Sigma Advisors, which reported holding $188.8 million worth of stock at the end of September. It was followed by AQR Capital Management with a $188.5 million position. Other investors bullish on the company included Adage Capital Management, Scopus Asset Management, and GLG Partners. In terms of the portfolio weights assigned to each position Water Asset Management allocated the biggest weight to Masco Corporation (NYSE:MAS), around 2.82% of its portfolio. Thames Capital Management is also relatively very bullish on the stock, designating 2.56 percent of its 13F equity portfolio to MAS.

As one would reasonably expect, key money managers were leading the bulls’ herd. Columbus Circle Investors, managed by Principal Global Investors, created the biggest position in Masco Corporation (NYSE:MAS). Columbus Circle Investors had $30.5 million invested in the company at the end of the quarter. Zach Schreiber’s Point State Capital also made a $25 million investment in the stock during the quarter. The other funds with new positions in the stock are Ryan Caldwell’s Chiron Investment Management, Jay Genzer’s Thames Capital Management, and Matthew Mark’s Jet Capital Investors.

Let’s also examine hedge fund activity in other stocks similar to Masco Corporation (NYSE:MAS). These stocks are American Airlines Group Inc (NASDAQ:AAL), Lyft, Inc. (NASDAQ:LYFT), DENTSPLY SIRONA Inc. (NASDAQ:XRAY), and BanColombia S.A. (NYSE:CIB). All of these stocks’ market caps are similar to MAS’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AAL 38 1781432 4
LYFT 33 880680 -4
XRAY 28 1628924 -1
CIB 11 166123 1
Average 27.5 1114290 0

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.5 hedge funds with bullish positions and the average amount invested in these stocks was $1114 million. That figure was $1008 million in MAS’s case. American Airlines Group Inc (NASDAQ:AAL) is the most popular stock in this table. On the other hand BanColombia S.A. (NYSE:CIB) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Masco Corporation (NYSE:MAS) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 34.7% in 2019 through November 22nd and outperformed the S&P 500 ETF (SPY) by 8.5 percentage points. Hedge funds were also right about betting on MAS as the stock returned 10.9% during Q4 (through 11/22) 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.

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

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