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Did Hedge Funds Drop The Ball On Love MasTec, Inc. (MTZ)?

Asma UL Husna

We are still in an overall bull market and many stocks that smart money investors were piling into surged through October 17th. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 45% and 39% respectively. Hedge funds' top 3 stock picks returned 34.4% this year and beat the S&P 500 ETFs by 13 percentage points. Investing in index funds guarantees you average returns, not superior returns. We are looking to generate superior returns for our readers. That's why we believe it isn't a waste of time to check out hedge fund sentiment before you invest in a stock like MasTec, Inc. (NYSE:MTZ).

Hedge fund interest in MasTec, Inc. (NYSE:MTZ) shares was flat at the end of last quarter. This is usually a negative indicator. At the end of this article we will also compare MTZ to other stocks including Healthequity Inc (NASDAQ:HQY), Spark Therapeutics Inc (NASDAQ:ONCE), and Cushman & Wakefield plc (NYSE:CWK) to get a better sense of its popularity. Our calculations also showed that MTZ isn't among the 30 most popular stocks among hedge funds (view the video below). Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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 has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 25.7% through September 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MTZ_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, 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. We're going to view the fresh hedge fund action surrounding MasTec, Inc. (NYSE:MTZ).

Hedge fund activity in MasTec, Inc. (NYSE:MTZ)

Heading into the third quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 22 hedge funds held shares or bullish call options in MTZ a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were adding to their holdings substantially (or already accumulated large positions).

[caption id="attachment_673968" align="aligncenter" width="473"] David Keidan of Buckingham Capital[/caption]

David Keidan of Buckingham Capital

The largest stake in MasTec, Inc. (NYSE:MTZ) was held by Peconic Partners LLC, which reported holding $227.5 million worth of stock at the end of March. It was followed by Citadel Investment Group with a $66.1 million position. Other investors bullish on the company included Alyeska Investment Group, SG Capital Management, and Scopus Asset Management.

Judging by the fact that MasTec, Inc. (NYSE:MTZ) has experienced a decline in interest from hedge fund managers, we can see that there exists a select few funds that decided to sell off their positions entirely last quarter. Intriguingly, Eric F. Billings's Billings Capital Management dropped the biggest stake of the 750 funds monitored by Insider Monkey, totaling about $16.9 million in stock, and Richard S. Meisenberg's ACK Asset Management was right behind this move, as the fund dumped about $4 million worth. These transactions are interesting, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

Let's check out hedge fund activity in other stocks - not necessarily in the same industry as MasTec, Inc. (NYSE:MTZ) but similarly valued. These stocks are Healthequity Inc (NASDAQ:HQY), Spark Therapeutics Inc (NASDAQ:ONCE), Cushman & Wakefield plc (NYSE:CWK), and Pure Storage, Inc. (NYSE:PSTG). This group of stocks' market values are closest to MTZ's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position HQY,23,300902,1 ONCE,39,1284491,3 CWK,14,159437,-12 PSTG,23,561696,2 Average,24.75,576632,-1.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $577 million. That figure was $453 million in MTZ's case. Spark Therapeutics Inc (NASDAQ:ONCE) is the most popular stock in this table. On the other hand Cushman & Wakefield plc (NYSE:CWK) is the least popular one with only 14 bullish hedge fund positions. MasTec, Inc. (NYSE:MTZ) 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 MTZ as the stock returned 26% during the third quarter and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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