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Did Hedge Funds Make The Right Call On Mattel, Inc. (MAT) ?

Abigail Fisher
·6 min read

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtMattel, Inc. (NASDAQ:MAT) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.

Is Mattel, Inc. (NASDAQ:MAT) a splendid investment right now? The smart money was becoming less hopeful. The number of bullish hedge fund positions were trimmed by 2 lately. Our calculations also showed that MAT isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). MAT was in 17 hedge funds' portfolios at the end of March. There were 19 hedge funds in our database with MAT positions at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most market participants, hedge funds are viewed as slow, old financial tools of the past. While there are over 8000 funds trading today, We look at the upper echelon of this group, around 850 funds. Most estimates calculate that this group of people oversee most of the smart money's total capital, and by shadowing their inimitable stock picks, Insider Monkey has figured out many investment strategies that have historically outrun the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outrun the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Mason Hawkins of Southeastern Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. With Federal Reserve creating trillions of dollars out of thin air, we believe gold prices will keep increasing. So, we are checking out gold stocks like this small gold mining company. We go through lists like the 10 most profitable companies in America 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. 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. With all of this in mind we're going to view the new hedge fund action encompassing Mattel, Inc. (NASDAQ:MAT).

What have hedge funds been doing with Mattel, Inc. (NASDAQ:MAT)?

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey were long this stock, a change of -11% from the fourth quarter of 2019. By comparison, 21 hedge funds held shares or bullish call options in MAT a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

The largest stake in Mattel, Inc. (NASDAQ:MAT) was held by Southeastern Asset Management, which reported holding $259.3 million worth of stock at the end of September. It was followed by Ariel Investments with a $155.1 million position. Other investors bullish on the company included Marshall Wace LLP, Citadel Investment Group, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Southeastern Asset Management allocated the biggest weight to Mattel, Inc. (NASDAQ:MAT), around 6.17% of its 13F portfolio. Ariel Investments is also relatively very bullish on the stock, setting aside 2.72 percent of its 13F equity portfolio to MAT.

Seeing as Mattel, Inc. (NASDAQ:MAT) has faced bearish sentiment from hedge fund managers, it's easy to see that there exists a select few hedge funds that slashed their positions entirely last quarter. Interestingly, Clint Carlson's Carlson Capital dropped the largest position of the 750 funds monitored by Insider Monkey, worth about $6.6 million in stock. Jeffrey Bronchick's fund, Cove Street Capital, also said goodbye to its stock, about $3.5 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 2 funds last quarter.

Let's now take a look at hedge fund activity in other stocks similar to Mattel, Inc. (NASDAQ:MAT). These stocks are FibroGen Inc (NASDAQ:FGEN), Unum Group (NYSE:UNM), Rayonier Inc. (NYSE:RYN), and Community Bank System, Inc. (NYSE:CBU). This group of stocks' market caps match MAT's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FGEN,22,283279,1 UNM,25,159751,-5 RYN,13,271594,-1 CBU,11,12275,1 Average,17.75,181725,-1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $182 million. That figure was $475 million in MAT's case. Unum Group (NYSE:UNM) is the most popular stock in this table. On the other hand Community Bank System, Inc. (NYSE:CBU) is the least popular one with only 11 bullish hedge fund positions. Mattel, Inc. (NASDAQ:MAT) is not the least popular stock in this group but hedge fund interest is still below average. 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 18.6% in 2020 through July 27th and surpassed the market by 17.1 percentage points. Unfortunately MAT wasn't nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); MAT investors were disappointed as the stock returned 23.3% since Q1 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.

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