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Did Hedge Funds Drop The Ball On Masco Corporation (MAS) ?

Asma UL Husna

With the fourth-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was Masco Corporation (NYSE:MAS).

Masco Corporation (NYSE:MAS) shareholders have witnessed a decrease in hedge fund interest lately. MAS was in 34 hedge funds' portfolios at the end of December. There were 35 hedge funds in our database with MAS positions at the end of the previous quarter. Our calculations also showed that MAS isn't among the 30 most popular stocks among hedge funds.

If you'd ask most stock holders, hedge funds are perceived as slow, old financial tools of the past. While there are greater than 8000 funds with their doors open at present, Our experts choose to focus on the upper echelon of this group, around 750 funds. Most estimates calculate that this group of people control the lion's share of all hedge funds' total capital, and by watching their unrivaled picks, Insider Monkey has unearthed a number of investment strategies that have historically beaten the market. Insider Monkey's flagship hedge fund strategy outperformed the S&P 500 index by nearly 5 percentage points per year since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 27.5% since February 2017 (through March 12th) even though the market was up nearly 25% during the same period. We just shared a list of 6 short targets in our latest quarterly update and they are already down an average of 6% in less than a month.

John Overdeck of Two Sigma

Let's analyze the new hedge fund action regarding Masco Corporation (NYSE:MAS).

What does the smart money think about Masco Corporation (NYSE:MAS)?

At the end of the fourth quarter, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the previous quarter. On the other hand, there were a total of 37 hedge funds with a bullish position in MAS a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).

MAS_mar2019

Among these funds, Iridian Asset Management held the most valuable stake in Masco Corporation (NYSE:MAS), which was worth $167.2 million at the end of the third quarter. On the second spot was Two Sigma Advisors which amassed $138.5 million worth of shares. Moreover, Citadel Investment Group, Millennium Management, and D E Shaw were also bullish on Masco Corporation (NYSE:MAS), allocating a large percentage of their portfolios to this stock.

Judging by the fact that Masco Corporation (NYSE:MAS) has witnessed falling interest from the smart money, it's easy to see that there were a few funds who were dropping their full holdings last quarter. It's worth mentioning that Jeff Lignelli's Incline Global Management dropped the largest investment of the 700 funds monitored by Insider Monkey, worth close to $35.2 million in stock, and Gabriel Plotkin's Melvin Capital Management was right behind this move, as the fund sold off about $29.3 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest dropped by 1 funds last quarter.

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Masco Corporation (NYSE:MAS) but similarly valued. We will take a look at Twilio Inc. (NYSE:TWLO), Viacom, Inc. (NASDAQ:VIAB), Yandex NV (NASDAQ:YNDX), and HollyFrontier Corporation (NYSE:HFC). This group of stocks' market values are closest to MAS's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TWLO,46,1506949,5 VIAB,37,690422,4 YNDX,23,514984,-14 HFC,25,717864,-1 Average,32.75,857555,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 32.75 hedge funds with bullish positions and the average amount invested in these stocks was $858 million. That figure was $1007 million in MAS's case. Twilio Inc. (NYSE:TWLO) is the most popular stock in this table. On the other hand Yandex NV (NASDAQ:YNDX) is the least popular one with only 23 bullish hedge fund positions. Masco Corporation (NYSE:MAS) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 15 most popular stocks among hedge funds returned 21.3% through April 8th and outperformed the S&P 500 ETF (SPY) by more than 5 percentage points. Hedge funds were also right about betting on MAS as the stock returned 40.2% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.

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

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