Is MasTec, Inc. (MTZ) Going to Burn These Hedge Funds?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the second quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 5 years and analyze what the smart money thinks of MasTec, Inc. (NYSE:MTZ) based on that data and determine whether they were really smart about the stock.

Is MasTec, Inc. (NYSE:MTZ) the right investment to pursue these days? Hedge funds were buying. The number of bullish hedge fund positions advanced by 5 lately. MasTec, Inc. (NYSE:MTZ) was in 29 hedge funds’ portfolios at the end of June. The all time high for this statistics is 41. Our calculations also showed that MTZ 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.

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 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.


Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, this “mom” trader turned $2000 into $2 million within 2 years. So, we are checking out her best trade idea of the month. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. 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. Keeping this in mind let’s take a peek at the latest hedge fund action regarding MasTec, Inc. (NYSE:MTZ).

How have hedgies been trading MasTec, Inc. (NYSE:MTZ)?

At the end of June, a total of 29 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 21% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in MTZ over the last 20 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in MasTec, Inc. (NYSE:MTZ) was held by AQR Capital Management, which reported holding $51.3 million worth of stock at the end of September. It was followed by SG Capital Management with a $21 million position. Other investors bullish on the company included Citadel Investment Group, Billings Capital Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Billings Capital Management allocated the biggest weight to MasTec, Inc. (NYSE:MTZ), around 11.93% of its 13F portfolio. SG Capital Management is also relatively very bullish on the stock, dishing out 3.91 percent of its 13F equity portfolio to MTZ.

As industrywide interest jumped, some big names have been driving this bullishness. Moore Global Investments, managed by Louis Bacon, established the largest position in MasTec, Inc. (NYSE:MTZ). Moore Global Investments had $6.4 million invested in the company at the end of the quarter. Andrew Byington’s Appian Way Asset Management also made a $4.5 million investment in the stock during the quarter. The following funds were also among the new MTZ investors: Mark Coe’s Intrinsic Edge Capital, Steve Cohen’s Point72 Asset Management, and Doug Gordon, Jon Hilsabeck and Don Jabro’s Shellback Capital.

Let’s also examine hedge fund activity in other stocks similar to MasTec, Inc. (NYSE:MTZ). These stocks are Colfax Corporation (NYSE:CFX), Quaker Chemical Corp (NYSE:KWR), OneMain Holdings Inc (NYSE:OMF), Medpace Holdings, Inc. (NASDAQ:MEDP), Murphy USA Inc. (NYSE:MUSA), AutoNation, Inc. (NYSE:AN), and Kohl’s Corporation (NYSE:KSS). This group of stocks’ market values are similar to MTZ’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CFX 39 607479 7
KWR 13 159316 5
OMF 37 342546 3
MEDP 22 220276 5
MUSA 27 301412 3
AN 29 293932 2
KSS 42 337352 16
Average 29.9 323188 5.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.9 hedge funds with bullish positions and the average amount invested in these stocks was $323 million. That figure was $160 million in MTZ’s case. Kohl’s Corporation (NYSE:KSS) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 13 bullish hedge fund positions. MasTec, Inc. (NYSE:MTZ) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MTZ is 58.8. 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. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 23.8% in 2020 through September 14th and surpassed the market by 17.6 percentage points. Unfortunately MTZ wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MTZ investors were disappointed as the stock returned -2.7% since Q2 and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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