Madison Funds: “Masco (MAS) Couldn’t Keep Up with the Market’s Strong Q4”

Madison Funds, an independent investment management firm, published its fourth quarter 2020 “Madison Small Cap Fund” investor letter – a copy of which can be downloaded here. A return of 27.61% was recorded by the fund’s Class Y shares in the fourth quarter of 2020, outperforming its Russell 2500 benchmark that had a 27.41% gain, but below its Russell 2000 index that delivered a 31.37% return in the same period. You can view the complete list of the fund’s Average Annual Total Returns and its top 5 holdings to have a peek at their top bets for 2021.

Madison Small Cap Fund, in their Q4 2020 investor letter, mentioned Masco Corporation (NYSE: MAS) and emphasized their views on the company. Masco Corporation is a Livonia, Michigan-based home improvement and new home construction product manufacturer that currently has a $15.4 billion market capitalization. Since the beginning of the year, MAS delivered a 9.32% return, impressively extending its 12-month gains to 73.30%. As of March 26, 2021, the stock closed at $60.05 per share.

Here is what Madison Small Cap Fund has to say about Masco Corporation in their Q4 2020 investor letter:

“The Industrial and Material sectors reaction to the vaccine news was sudden. Many investors pivoted quickly to deep cyclicals and reopening plays. We were disappointed in our performance in this sector. Through the year, we had liquidated several of our more pandemic exposed names at depressed prices with the expectations that we would revisit them. Unfortunately, the strong market recovery took us by surprise, and we did not execute well. The fourth quarter continued this streak of underperformance, and while we made some incremental investments recently, we do not want to compound our mistake by chasing stocks that have already high embedded reopening expectations. Our largest underperformer in the space was Masco, which has been a successful investment overall. The stock, as well as other of our holdings, simply could not keep up with the market’s strong fourth quarter.”

Our calculations show that Masco Corporation (NYSE: MAS) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Masco Corporation was in 40 hedge fund portfolios, compared to 46 funds in the third quarter. MAS delivered a 5.74% return in the past 3 months.