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Were Hedge Funds On Target With Mastercard Incorporated (MA) Bets?

Reymerlyn Martin
·6 min read

Is Mastercard Incorporated (NYSE:MA) a healthy stock for your portfolio? The smart money was betting on the stock. The number of bullish hedge fund positions moved up by 8 in recent months. Mastercard Incorporated (NYSE:MA) was in 147 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics was 139 (2020 Q1). This means the bullish number of hedge fund positions in this stock currently sits at its all time high. Our calculations also showed that MA ranked #7 among the 30 most popular stocks among hedge funds (click for Q2 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.

To most shareholders, hedge funds are viewed as slow, old investment tools of years past. While there are greater than 8000 funds with their doors open at the moment, We hone in on the elite of this club, about 850 funds. These money managers manage bulk of the smart money's total asset base, and by monitoring their best picks, Insider Monkey has figured out several investment strategies that have historically exceeded Mr. Market. Insider Monkey's flagship short hedge fund strategy beat the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

MOORE GLOBAL INVESTMENTS
MOORE GLOBAL INVESTMENTS

Louis Bacon Moore of Moore Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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 website to get excerpts of these letters in your inbox. Now we're going to take a peek at the recent hedge fund action surrounding Mastercard Incorporated (NYSE:MA).

How are hedge funds trading Mastercard Incorporated (NYSE:MA)?

At Q2's end, a total of 147 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from one quarter earlier. On the other hand, there were a total of 99 hedge funds with a bullish position in MA a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Mastercard Incorporated (NYSE:MA) was held by Akre Capital Management, which reported holding $1739.9 million worth of stock at the end of September. It was followed by Gardner Russo & Gardner with a $1598.9 million position. Other investors bullish on the company included Berkshire Hathaway, Fisher Asset Management, and GQG Partners. In terms of the portfolio weights assigned to each position VGI Partners allocated the biggest weight to Mastercard Incorporated (NYSE:MA), around 21.49% of its 13F portfolio. KG Funds Management is also relatively very bullish on the stock, earmarking 18.46 percent of its 13F equity portfolio to MA.

As industrywide interest jumped, key money managers were breaking ground themselves. Appaloosa Management LP, managed by David Tepper, assembled the biggest position in Mastercard Incorporated (NYSE:MA). Appaloosa Management LP had $161.2 million invested in the company at the end of the quarter. Richard Gerson and Navroz D. Udwadia's Falcon Edge Capital also made a $54 million investment in the stock during the quarter. The other funds with brand new MA positions are Jack Woodruff's Candlestick Capital Management, Robert Boucai's Newbrook Capital Advisors, and Louis Bacon's Moore Global Investments.

Let's now take a look at hedge fund activity in other stocks similar to Mastercard Incorporated (NYSE:MA). We will take a look at The Procter & Gamble Company (NYSE:PG), Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM), JPMorgan Chase & Co. (NYSE:JPM), UnitedHealth Group Inc. (NYSE:UNH), The Home Depot, Inc. (NYSE:HD), Intel Corporation (NASDAQ:INTC), and NVIDIA Corporation (NASDAQ:NVDA). This group of stocks' market valuations match MA's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PG,73,9244143,-4 TSM,58,5209772,4 JPM,123,8732467,11 UNH,96,8326373,-8 HD,85,4642557,-2 INTC,78,6480425,5 NVDA,92,5548398,-3 Average,86.4,6883448,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 86.4 hedge funds with bullish positions and the average amount invested in these stocks was $6883 million. That figure was $14350 million in MA's case. JPMorgan Chase & Co. (NYSE:JPM) is the most popular stock in this table. On the other hand Taiwan Semiconductor Mfg. Co. Ltd. (NYSE:TSM) is the least popular one with only 58 bullish hedge fund positions. Compared to these stocks Mastercard Incorporated (NYSE:MA) is more popular among hedge funds. Our overall hedge fund sentiment score for MA is 97 (out of 100). 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 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 returned 29.2% in 2020 through October 16th but still managed to beat the market by 19.7 percentage points. Hedge funds were also right about betting on MA as the stock returned 15.1% since the end of June (through 10/16) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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