Reputable billionaire investors such as Nelson Peltz and David Tepper generate exorbitant profits for their wealthy accredited investors (a minimum of $1 million in investable assets would be required to invest in a hedge fund and most successful hedge funds won’t accept your savings unless you commit at least $5 million) by pinpointing winning small-cap stocks. There is little or no publicly-available information at all on some of these small companies, which makes it hard for an individual investor to pin down a winner within the small-cap space. However, hedge funds and other big asset managers can do the due diligence and analysis for you instead, thanks to their highly-skilled research teams and vast resources to conduct an appropriate evaluation process. Looking for potential winners within the small-cap galaxy of stocks? We believe following the smart money is a good starting point.
Marathon Oil Corporation (NYSE:MRO) has seen a decrease in activity from the world’s largest hedge funds lately. Hedge fund ownership of the stock has fallen by over 33% in the past year. At the end of this article we will also compare MRO to other stocks including National-Oilwell Varco, Inc. (NYSE:NOV), Macerich Co (NYSE:MAC), and Nomura Holdings, Inc. (ADR) (NYSE:NMR) to get a better sense of its popularity.
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How have hedgies been trading Marathon Oil Corporation (NYSE:MRO)?
At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 15% fall from one quarter earlier, as hedge fund ownership of the stock continues to wilt. With hedgies’ capital changing hands, there exists an “upper tier” of key hedge fund managers who were upping their stakes considerably (or already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, D E Shaw, founded by David E. Shaw, holds the number one position in Marathon Oil Corporation (NYSE:MRO). D E Shaw has a $48.3 million position in the stock. On D E Shaw’s heels is Alyeska Investment Group, led by Anand Parekh, holding a $44.5 million position. Remaining members of the smart money with similar optimism include Charles Clough’s Clough Capital Partners and Phill Gross and Robert Atchinson’s Adage Capital Management.
Seeing as Marathon Oil Corporation (NYSE:MRO) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain “tier” of hedge funds that slashed their full holdings last quarter. At the top of the heap, Stuart J. Zimmer’s Zimmer Partners dropped the biggest stake of all the hedgies watched by Insider Monkey, totaling close to $210.4 million in stock, and Dan Loeb’s Third Point was right behind this move, as the fund said goodbye to about $60 million worth of shares. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 4 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Marathon Oil Corporation (NYSE:MRO). We will take a look at National-Oilwell Varco, Inc. (NYSE:NOV), Macerich Co (NYSE:MAC), Nomura Holdings, Inc. (ADR) (NYSE:NMR), and Whirlpool Corporation (NYSE:WHR). This group of stocks’ market caps match MRO’s market cap.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 20 hedge funds with bullish positions and the average amount invested in these stocks was $519 million. That figure was $214 million in MRO’s case. Whirlpool Corporation (NYSE:WHR) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (ADR) (NYSE:NMR) is the least popular one with only 3 bullish hedge fund positions. Marathon Oil Corporation (NYSE:MRO) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. In this regard WHR might be a better candidate to consider a long position in.