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Marvell Technology Group Ltd. (MRVL) vs. Top 20 Hedge Fund Stocks in 2019

Debasis Saha

We are still in an overall bull market and many stocks that smart money investors were piling into surged in 2019. Among them, Facebook and Microsoft ranked among the top 3 picks and these stocks gained 57% each. Hedge funds' top 3 stock picks returned 44.6% this year and beat the S&P 500 ETFs by nearly 14 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 Marvell Technology Group Ltd. (NASDAQ:MRVL).

Marvell Technology Group Ltd. (NASDAQ:MRVL) investors should be aware of a decrease in hedge fund sentiment in recent months. MRVL was in 31 hedge funds' portfolios at the end of the third quarter of 2019. There were 37 hedge funds in our database with MRVL positions at the end of the previous quarter. Our calculations also showed that MRVL isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

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 Russell 2000 ETFs by 40 percentage points since May 2014 (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 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_258236" align="alignnone" width="600"] Ken Griffin of Citadel Investment Group[/caption]

Ken Griffin

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. Keeping this in mind we're going to review the new hedge fund action regarding Marvell Technology Group Ltd. (NASDAQ:MRVL).

What have hedge funds been doing with Marvell Technology Group Ltd. (NASDAQ:MRVL)?

At Q3's end, a total of 31 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MRVL over the last 17 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MRVL A Good Stock To Buy?

More specifically, Citadel Investment Group was the largest shareholder of Marvell Technology Group Ltd. (NASDAQ:MRVL), with a stake worth $192.9 million reported as of the end of September. Trailing Citadel Investment Group was Whale Rock Capital Management, which amassed a stake valued at $126.6 million. Adage Capital Management, Polar Capital, and Fisher Asset Management 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 Crosslink Capital allocated the biggest weight to Marvell Technology Group Ltd. (NASDAQ:MRVL), around 3.38% of its 13F portfolio. Whale Rock Capital Management is also relatively very bullish on the stock, dishing out 2.34 percent of its 13F equity portfolio to MRVL.

Seeing as Marvell Technology Group Ltd. (NASDAQ:MRVL) has experienced bearish sentiment from the aggregate hedge fund industry, logic holds that there is a sect of money managers that elected to cut their full holdings by the end of the third quarter. It's worth mentioning that Doug Silverman and Alexander Klabin's Senator Investment Group dumped the largest stake of all the hedgies watched by Insider Monkey, comprising about $119.4 million in stock, and Steve Cohen's Point72 Asset Management was right behind this move, as the fund sold off about $95 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 6 funds by the end of the third quarter.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Marvell Technology Group Ltd. (NASDAQ:MRVL) but similarly valued. We will take a look at Credicorp Ltd. (NYSE:BAP), Halliburton Company (NYSE:HAL), International Paper Company (NYSE:IP), and Laboratory Corp. of America Holdings (NYSE:LH). All of these stocks' market caps are closest to MRVL's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BAP,22,655780,2 HAL,31,817394,-2 IP,27,273248,-4 LH,40,1435297,2 Average,30,795430,-0.5 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 30 hedge funds with bullish positions and the average amount invested in these stocks was $795 million. That figure was $682 million in MRVL's case. Laboratory Corp. of America Holdings (NYSE:LH) is the most popular stock in this table. On the other hand Credicorp Ltd. (NYSE:BAP) is the least popular one with only 22 bullish hedge fund positions. Marvell Technology Group Ltd. (NASDAQ:MRVL) 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 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on MRVL as the stock returned 65% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

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

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