Hedge funds and other investment firms that we track manage billions of dollars of their wealthy clients' money, and needless to say, they are painstakingly thorough when analyzing where to invest this money, as their own wealth also depends on it. Regardless of the various methods used by elite investors like David Tepper and David Abrams, the resources they expend are second-to-none. This is especially valuable when it comes to small-cap stocks, which is where they generate their strongest outperformance, as their resources give them a huge edge when it comes to studying these stocks compared to the average investor, which is why we intently follow their activity in the small-cap space.
Why do we pay any attention at all to hedge fund sentiment? 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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We're going to take a peek at the recent hedge fund action encompassing MasTec, Inc. (NYSE:MTZ).
Hedge fund activity in MasTec, Inc. (NYSE:MTZ)
Heading into the second quarter of 2019, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards MTZ over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Peconic Partners LLC held the most valuable stake in MasTec, Inc. (NYSE:MTZ), which was worth $636.5 million at the end of the first quarter. On the second spot was Alyeska Investment Group which amassed $45.5 million worth of shares. Moreover, Citadel Investment Group, SG Capital Management, and Millennium Management were also bullish on MasTec, Inc. (NYSE:MTZ), allocating a large percentage of their portfolios to this stock.
Judging by the fact that MasTec, Inc. (NYSE:MTZ) has witnessed falling interest from the smart money, logic holds that there lies a certain "tier" of money managers that slashed their entire stakes by the end of the third quarter. Intriguingly, Jonathan Barrett and Paul Segal's Luminus Management dumped the largest stake of the 700 funds followed by Insider Monkey, totaling about $16.5 million in stock, and Doug Gordon, Jon Hilsabeck and Don Jabro's Shellback Capital was right behind this move, as the fund said goodbye to about $16.2 million worth. These moves are intriguing to say the least, as total hedge fund interest fell by 1 funds by the end of the third quarter.
Let's go over hedge fund activity in other stocks - not necessarily in the same industry as MasTec, Inc. (NYSE:MTZ) but similarly valued. We will take a look at VEON Ltd. (NASDAQ:VEON), Apple Hospitality REIT Inc (NYSE:APLE), Churchill Downs Incorporated (NASDAQ:CHDN), and Umpqua Holdings Corp (NASDAQ:UMPQ). This group of stocks' market valuations are similar to MTZ's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VEON,15,71783,6 APLE,13,87640,2 CHDN,29,519547,3 UMPQ,20,218914,0 Average,19.25,224471,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $224 million. That figure was $875 million in MTZ's case. Churchill Downs Incorporated (NASDAQ:CHDN) is the most popular stock in this table. On the other hand Apple Hospitality REIT Inc (NYSE:APLE) is the least popular one with only 13 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Hedge funds were also right about betting on MTZ, though not to the same extent, as the stock returned -1.2% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.