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 Mastercard Incorporated (NYSE:MA) based on that data and determine whether they were really smart about the stock.
Is Mastercard Incorporated (NYSE:MA) a bargain? Money managers were becoming more confident. The number of bullish hedge fund bets advanced by 8 lately. Our calculations also showed that MA ranked #7 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.
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 was 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out ideas like this under-the-radar stock to identify the next tenbagger. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let's take a look at the new hedge fund action encompassing Mastercard Incorporated (NYSE:MA).
What have hedge funds been doing with Mastercard Incorporated (NYSE:MA)?
At Q2's end, a total of 147 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the first quarter of 2020. By comparison, 99 hedge funds held shares or bullish call options in MA a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Akre Capital Management held the most valuable stake in Mastercard Incorporated (NYSE:MA), which was worth $1739.9 million at the end of the third quarter. On the second spot was Gardner Russo & Gardner which amassed $1598.9 million worth of shares. Berkshire Hathaway, Fisher Asset Management, and GQG Partners were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to Mastercard Incorporated (NYSE:MA), around 21.49% of its 13F portfolio. KG Funds Management is also relatively very bullish on the stock, earmarking 18.46 percent of its 13F equity portfolio to MA.
As industrywide interest jumped, key hedge funds have jumped into Mastercard Incorporated (NYSE:MA) headfirst. Appaloosa Management LP, managed by David Tepper, created the most valuable position in Mastercard Incorporated (NYSE:MA). Appaloosa Management LP had $161.2 million invested in the company at the end of the quarter. Richard Gerson and Navroz D. Udwadia's Falcon Edge Capital also made a $54 million investment in the stock during the quarter. The other funds with brand new MA positions are Jack Woodruff's Candlestick Capital Management, Robert Boucai's Newbrook Capital Advisors, and Louis Bacon's Moore Global Investments.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Mastercard Incorporated (NYSE:MA) but similarly valued. We will take a look at UnitedHealth Group Inc. (NYSE:UNH), Intel Corporation (NASDAQ:INTC), Verizon Communications Inc. (NYSE:VZ), AT&T Inc. (NYSE:T), The Home Depot, Inc. (NYSE:HD), Merck & Co., Inc. (NYSE:MRK), and The Coca-Cola Company (NYSE:KO). This group of stocks' market caps resemble MA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position UNH,96,8326373,-8 INTC,78,6480425,5 VZ,68,2973925,0 T,57,1659928,0 HD,85,4642557,-2 MRK,76,4854278,-2 KO,59,20093024,4 Average,74.1,7004359,-0.4 [/table]
As you can see these stocks had an average of 74.1 hedge funds with bullish positions and the average amount invested in these stocks was $7 billion. That figure was $14.4 billion in MA's case. UnitedHealth Group Inc. (NYSE:UNH) is the most popular stock in this table. On the other hand AT&T Inc. (NYSE:T) is the least popular one with only 57 bullish hedge fund positions. Compared to these stocks Mastercard Incorporated (NYSE:MA) is more popular among hedge funds. Our overall hedge fund sentiment score for MA is 97. 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. 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 returned 28.2% in 2020 through August 24th but still managed to beat the market by 20.6 percentage points. Hedge funds were also right about betting on MA as the stock returned 16.4% since the end of June 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.
