Hedge Funds Dumped Marathon Petroleum Corp (MPC) During The Crash

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. In this article, we look at what those funds think of Marathon Petroleum Corp (NYSE:MPC) based on that data.

Marathon Petroleum Corp (NYSE:MPC) was in 57 hedge funds’ portfolios at the end of the first quarter of 2020. MPC investors should pay attention to a decrease in support from the world’s most elite money managers lately. There were 69 hedge funds in our database with MPC holdings at the end of the previous quarter. Our calculations also showed that MPC 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.

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’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by 44 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We interview hedge fund managers and ask them about best ideas. You can watch our latest hedge fund manager interview here and find out the name of the large-cap healthcare stock that Sio Capital’s Michael Castor expects to double. 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 S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Now let’s view the key hedge fund action surrounding Marathon Petroleum Corp (NYSE:MPC).

What have hedge funds been doing with Marathon Petroleum Corp (NYSE:MPC)?

At the end of the first quarter, a total of 57 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. On the other hand, there were a total of 65 hedge funds with a bullish position in MPC a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their holdings substantially (or already accumulated large positions).

Among these funds, Elliott Management held the most valuable stake in Marathon Petroleum Corp (NYSE:MPC), which was worth $228.4 million at the end of the third quarter. On the second spot was Whitebox Advisors which amassed $105.9 million worth of shares. Iridian Asset Management, Empyrean Capital Partners, and Steadfast Capital 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 Yaupon Capital allocated the biggest weight to Marathon Petroleum Corp (NYSE:MPC), around 5.84% of its 13F portfolio. Empyrean Capital Partners is also relatively very bullish on the stock, designating 5.65 percent of its 13F equity portfolio to MPC.

Judging by the fact that Marathon Petroleum Corp (NYSE:MPC) has experienced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there were a few hedge funds who sold off their full holdings heading into Q4. It’s worth mentioning that Renaissance Technologies said goodbye to the biggest investment of the “upper crust” of funds tracked by Insider Monkey, totaling an estimated $144.1 million in stock. Michael Lowenstein’s fund, Kensico Capital, also sold off its stock, about $134.7 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest was cut by 12 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Marathon Petroleum Corp (NYSE:MPC). We will take a look at Check Point Software Technologies Ltd. (NASDAQ:CHKP), IAC/InterActiveCorp (NASDAQ:IAC), Skyworks Solutions Inc (NASDAQ:SWKS), and BioMarin Pharmaceutical Inc. (NASDAQ:BMRN). This group of stocks’ market caps are similar to MPC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CHKP 29 599085 -1
IAC 57 2692755 -14
SWKS 29 768807 -14
BMRN 54 1567492 5
Average 42.25 1407035 -6

View table here if you experience formatting issues.

As you can see these stocks had an average of 42.25 hedge funds with bullish positions and the average amount invested in these stocks was $1407 million. That figure was $997 million in MPC’s case. IAC/InterActiveCorp (NASDAQ:IAC) is the most popular stock in this table. On the other hand Check Point Software Technologies Ltd. (NASDAQ:CHKP) is the least popular one with only 29 bullish hedge fund positions. Marathon Petroleum Corp (NYSE:MPC) 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 7.9% in 2020 through May 22nd but still beat the market by 15.6 percentage points. Hedge funds were also right about betting on MPC as the stock returned 53.1% in Q2 (through May 22nd) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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