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Marvell Technology Group Ltd. (MRVL): Are Hedge Funds Right About Buying This Stock?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Marvell Technology Group Ltd. (NASDAQ:MRVL).

Is Marvell Technology Group Ltd. (NASDAQ:MRVL) a buy, sell, or hold? The best stock pickers are taking an optimistic view. The number of bullish hedge fund bets inched up by 5 in recent months. Our calculations also showed that MRVL isn’t among the 30 most popular stocks among hedge funds (see the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 our short portfolio.

MRVL_oct2019

Unlike some fund managers who are betting on Dow reaching 40000 in a year, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s go over the new hedge fund action regarding Marvell Technology Group Ltd. (NASDAQ:MRVL).

What have hedge funds been doing with Marvell Technology Group Ltd. (NASDAQ:MRVL)?

At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey were long this stock, a change of 16% from the first quarter of 2019. By comparison, 39 hedge funds held shares or bullish call options in MRVL a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their stakes significantly (or already accumulated large positions).

MOORE GLOBAL INVESTMENTS

When looking at the institutional investors followed by Insider Monkey, Alex Sacerdote’s Whale Rock Capital Management has the most valuable position in Marvell Technology Group Ltd. (NASDAQ:MRVL), worth close to $204.9 million, corresponding to 3.5% of its total 13F portfolio. On Whale Rock Capital Management’s heels is Citadel Investment Group, managed by Ken Griffin, which holds a $133.2 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors with similar optimism contain Doug Silverman and Alexander Klabin’s Senator Investment Group, Steve Cohen’s Point72 Asset Management and Josh Resnick’s Jericho Capital Asset Management.

As aggregate interest increased, some big names have jumped into Marvell Technology Group Ltd. (NASDAQ:MRVL) headfirst. Whale Rock Capital Management, managed by Alex Sacerdote, established the most outsized position in Marvell Technology Group Ltd. (NASDAQ:MRVL). Whale Rock Capital Management had $204.9 million invested in the company at the end of the quarter. Doug Silverman and Alexander Klabin’s Senator Investment Group also initiated a $119.4 million position during the quarter. The other funds with new positions in the stock are Josh Resnick’s Jericho Capital Asset Management, Brian Ashford-Russell and Tim Woolley’s Polar Capital, and Louis Bacon’s Moore Global Investments.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Marvell Technology Group Ltd. (NASDAQ:MRVL) but similarly valued. These stocks are WPP plc (NYSE:WPP), Avangrid, Inc. (NYSE:AGR), Lennar Corporation (NYSE:LEN), and Deutsche Bank Aktiengesellschaft (NYSE:DB). This group of stocks’ market caps are similar to MRVL’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
WPP 3 35860 -8
AGR 12 324913 -5
LEN 53 1832701 -8
DB 11 1015885 -2
Average 19.75 802340 -5.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.75 hedge funds with bullish positions and the average amount invested in these stocks was $802 million. That figure was $1148 million in MRVL’s case. Lennar Corporation (NYSE:LEN) is the most popular stock in this table. On the other hand WPP plc (NYSE:WPP) is the least popular one with only 3 bullish hedge fund positions. Marvell Technology Group Ltd. (NASDAQ:MRVL) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Hedge funds were also right about betting on MRVL, though not to the same extent, as the stock returned 4.9% during the third quarter and outperformed the market as well.

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

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