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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Marvell Technology, Inc. (NASDAQ:MRVL).
Is Marvell Technology, Inc. (NASDAQ:MRVL) undervalued? Prominent investors were getting less bullish. The number of bullish hedge fund positions dropped by 7 lately. Marvell Technology, Inc. (NASDAQ:MRVL) was in 33 hedge funds' portfolios at the end of the first quarter of 2021. The all time high for this statistic is 50. Our calculations also showed that MRVL isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 40 hedge funds in our database with MRVL positions at the end of the fourth quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. 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 115 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
Michael Gelband of ExodusPoint Capital
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we're going to analyze the fresh hedge fund action encompassing Marvell Technology, Inc. (NASDAQ:MRVL).
Do Hedge Funds Think MRVL Is A Good Stock To Buy Now?
At Q1's end, a total of 33 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MRVL over the last 23 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Citadel Investment Group was the largest shareholder of Marvell Technology, Inc. (NASDAQ:MRVL), with a stake worth $250.2 million reported as of the end of March. Trailing Citadel Investment Group was Pentwater Capital Management, which amassed a stake valued at $195.4 million. Holocene Advisors, Adage Capital Management, and Citadel Investment Group 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 Totem Point Management allocated the biggest weight to Marvell Technology, Inc. (NASDAQ:MRVL), around 9.55% of its 13F portfolio. Crosslink Capital is also relatively very bullish on the stock, setting aside 4.38 percent of its 13F equity portfolio to MRVL.
Due to the fact that Marvell Technology, Inc. (NASDAQ:MRVL) has witnessed declining sentiment from the entirety of the hedge funds we track, it's safe to say that there is a sect of fund managers who were dropping their full holdings by the end of the first quarter. Interestingly, Principal Global Investors's Columbus Circle Investors cut the biggest investment of the "upper crust" of funds watched by Insider Monkey, totaling an estimated $22.2 million in stock. Javier Velazquez's fund, Albar Capital, also dumped its stock, about $7.1 million worth. These transactions are important to note, as total hedge fund interest dropped by 7 funds by the end of the first quarter.
Let's go over hedge fund activity in other stocks similar to Marvell Technology, Inc. (NASDAQ:MRVL). We will take a look at Orange SA (NYSE:ORAN), The Hershey Company (NYSE:HSY), Wayfair Inc (NYSE:W), Yum! Brands, Inc. (NYSE:YUM), Stanley Black & Decker, Inc. (NYSE:SWK), D.R. Horton, Inc. (NYSE:DHI), and CoStar Group Inc (NASDAQ:CSGP). This group of stocks' market valuations match MRVL's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ORAN,2,10613,-1 HSY,42,1267940,3 W,37,4012752,-3 YUM,32,751481,-1 SWK,33,993045,-5 DHI,50,2174422,-14 CSGP,43,2784728,-8 Average,34.1,1713569,-4.1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 34.1 hedge funds with bullish positions and the average amount invested in these stocks was $1714 million. That figure was $683 million in MRVL's case. D.R. Horton, Inc. (NYSE:DHI) is the most popular stock in this table. On the other hand Orange SA (NYSE:ORAN) is the least popular one with only 2 bullish hedge fund positions. Marvell Technology, Inc. (NASDAQ:MRVL) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MRVL is 50.1. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 22.8% in 2021 through July 2nd and still beat the market by 6 percentage points. A small number of hedge funds were also right about betting on MRVL as the stock returned 17.4% since the end of the first quarter (through 7/2) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.