We track more than 800 hedge funds and measure the performance of their long stock picks in real time through a giant $1.6 trillion portfolio of these investors’ long positions that we created. It is true that hedge funds had some high profile losses this year that are “celebrated” by the media, but their stock picks actually outperformed the S&P 500 Total Return Index by 50 basis points and the Russell 2000 Index by 410 basis points during the first 2 months of this year. So, on average it is a good idea to pay attention to what hedge funds are doing. Keeping this in mind, let’s take a look at the hedge fund activity in Mastercard Inc (NYSE:MA).
Is Mastercard Inc (NYSE:MA) an exceptional investment? Hedge funds are betting on the stock. The number of bullish hedge fund bets went up by four in recent months. MA was in 80 hedge funds’ portfolios at the end of December. There were 76 hedge funds in our database with MA positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as British American Tobacco PLC (ADR) (NYSEAMEX:BTI), GlaxoSmithKline plc (ADR) (NYSE:GSK), and The Boeing Company (NYSE:BA) to gather more data points.
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Follow Mastercard Inc (NYSE:MA)
The global payments processor remains one of the more popular stocks among the hedge funds in our system, though it trails rival Visa Inc (NYSE:V), which had a strong year characterized by several high profile additions to its customer base, including Costco Wholesale Corporation (NASDAQ:COST), by 21 funds (though this was down from 26 at the end of the third quarter). On the other hand, MasterCard is trouncing its other main rival, American Express Company (NYSE:AXP) (which lost the Costco account to Visa) by 27 funds as American Express begins to wilt under the pressure being exerted by its rivals and the increasing array of other digital payment options. Revenue for the firm fell by 4% in 2015, while EPS fell by 10%, which has led to a 29% loss for the stock over the past year.
On the other hand, MasterCard booked a 9% year-over-year revenue increase in the fourth quarter of 2015, on a constant currency basis, and enjoyed 12% jumps in both processed transactions and gross dollar volume during the quarter, despite the latter figure facing pressure from swooning gas prices. Earnings also jumped by 18% year-over-year on a constant currency basis.
Wallace Weitz‘s Wallace R. Weitz & Co. had this to say about MasterCard in commentary on the fund’s 2015 third quarter activity:
“MasterCard (NYSE:MA) is the world’s second largest payment network and one of the best known global brands, needing little introduction. The Fund began building a position below $85 during the broader market swoon in August at a nice discount to our base case estimate of intrinsic value. MasterCard is among the most attractive businesses we own. Its network is well entrenched within the plumbing of payment systems across the globe, the transition from cash to digital forms of payment provides growth opportunities over and above underlying economic expansion, and its core business produces healthy doses of excess cash flow with modest reinvestment requirements. We would welcome additional opportunities to add to the Fund’s position.”
Mr. Weitz has done just that, upping his fund’s stake in MasterCard by another 8% during the fourth quarter, to 395,874 shares, after an 18% increase to its position in the third quarter.
With all of this in mind, on the following page we’ll go over the other recent action surrounding Mastercard Inc (NYSE:MA) from the top investors in our system.
How are hedge funds trading Mastercard Inc (NYSE:MA)?
Heading into 2016, a total of 80 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 5% rise from the previous quarter. With hedgies’ capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings considerably (or had already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Tom Russo’s Gardner Russo & Gardner has the number one position in Mastercard Inc (NYSE:MA), worth close to $944.5 million, corresponding to 8.1% of its total 13F portfolio. On Gardner Russo & Gardner’s heels is Stephen Mandel of Lone Pine Capital, with a $598.8 million position; 2.6% of his 13F portfolio is allocated to the company. Some other hedge funds and institutional investors that are bullish consist of Warren Buffett’s Berkshire Hathaway, Charles Akre’s Akre Capital Management, and Jim Simons’ Renaissance Technologies.
Now, some big names have been driving this bullishness. Tiger Eye Capital, managed by Ben Gambill, created the biggest position in Mastercard Inc (NYSE:MA). Tiger Eye Capital had $45.4 million invested in the company at the end of the quarter. Stuart Powers’ Hengistbury Investment Partners also initiated a $42.2 million position during the quarter. The other funds with new positions in the stock are Barry Dargan’s Intermede Investment Partners, Ike Kier and Ilya Zaides’ KG Funds Management, and Israel Englander’s Millennium Management.
Let’s go over hedge fund activity in other stocks similar to Mastercard Inc (NYSE:MA). We will take a look at British American Tobacco PLC (ADR) (NYSEAMEX:BTI), GlaxoSmithKline plc (ADR) (NYSE:GSK), The Boeing Company (NYSE:BA), and AbbVie Inc (NYSE:ABBV). This group of stocks’ market caps are similar to MA’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BTI | 15 | 451562 | 0 |
| GSK | 29 | 856833 | -6 |
| BA | 42 | 983977 | 7 |
| ABBV | 70 | 5288210 | -8 |
As you can see these stocks had an average of 39 hedge funds with bullish positions and the average amount invested in these stocks was $1.90 billion. That figure was $6.01 billion in MA’s case. AbbVie Inc (NYSE:ABBV) is the most popular stock in this table. On the other hand British American Tobacco PLC (ADR) (NYSEAMEX:BTI) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Mastercard Inc (NYSE:MA) is more popular among hedge funds and has quite a bit more money invested in it. Considering that hedge funds are fond of this stock in relation to its market cap peers and that many consider it a good investment even alongside its main rival Visa, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
