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Do Hedge Funds Love Masco Corporation (MAS)?

Debasis Saha

In this article you are going to find out whether hedge funds think Masco Corporation (NYSE:MAS) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Masco Corporation (NYSE:MAS) has experienced a decrease in hedge fund interest recently. Our calculations also showed that MAS 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). Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 87% since March 2017 and outperformed the S&P 500 ETFs by more than 51 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

[caption id="attachment_189632" align="aligncenter" width="400"] David Harding of Winton Capital Management[/caption]

David Harding

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020's unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let's review the latest hedge fund action surrounding Masco Corporation (NYSE:MAS).

How are hedge funds trading Masco Corporation (NYSE:MAS)?

At Q1's end, a total of 34 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -24% from the fourth quarter of 2019. On the other hand, there were a total of 40 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 key hedge fund managers who were boosting their stakes significantly (or already accumulated large positions).

Is MAS A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Masco Corporation (NYSE:MAS), with a stake worth $87.5 million reported as of the end of September. Trailing Citadel Investment Group was AQR Capital Management, which amassed a stake valued at $75.4 million. Two Sigma Advisors, Adage Capital Management, and Ariel Investments 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 SAYA Management allocated the biggest weight to Masco Corporation (NYSE:MAS), around 5.53% of its 13F portfolio. 12th Street Asset Management is also relatively very bullish on the stock, dishing out 3.88 percent of its 13F equity portfolio to MAS.

Due to the fact that Masco Corporation (NYSE:MAS) has faced falling interest from the entirety of the hedge funds we track, it's easy to see that there exists a select few money managers that elected to cut their full holdings in the third quarter. At the top of the heap,  Renaissance Technologies dumped the largest position of the 750 funds monitored by Insider Monkey, valued at an estimated $29.8 million in stock. Ryan Caldwell's fund, Chiron Investment Management, also dropped its stock, about $21.5 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 11 funds in the third quarter.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Masco Corporation (NYSE:MAS) but similarly valued. These stocks are Agnico Eagle Mines Limited (NYSE:AEM), W.R. Berkley Corporation (NYSE:WRB), NiSource Inc. (NYSE:NI), and DaVita Inc (NYSE:DVA). This group of stocks' market valuations are closest to MAS's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position AEM,25,392047,-9 WRB,26,208286,-8 NI,27,641894,-1 DVA,43,3657786,5 Average,30.25,1225003,-3.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30.25 hedge funds with bullish positions and the average amount invested in these stocks was $1225 million. That figure was $490 million in MAS's case. DaVita Inc (NYSE:DVA) is the most popular stock in this table. On the other hand Agnico Eagle Mines Limited (NYSE:AEM) is the least popular one with only 25 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. 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 8.3% in 2020 through the end of May but still beat the market by 13.2 percentage points. Hedge funds were also right about betting on MAS as the stock returned 35.4% in Q2 (through the end of May) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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