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Were Hedge Funds Right About Murphy Oil Corporation (MUR)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Murphy Oil Corporation (NYSE:MUR) based on that data and determine whether they were really smart about the stock.

Is Murphy Oil Corporation (NYSE:MUR) a buy right now? Money managers were reducing their bets on the stock. The number of bullish hedge fund bets dropped by 4 in recent months. Our calculations also showed that MUR 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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 58 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’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Pzena - Pzena Investment Management

Richard S. Pzena of Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Now let’s take a gander at the recent hedge fund action regarding Murphy Oil Corporation (NYSE:MUR).

How have hedgies been trading Murphy Oil Corporation (NYSE:MUR)?

At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -17% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MUR over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).

The largest stake in Murphy Oil Corporation (NYSE:MUR) was held by Pzena Investment Management, which reported holding $21.2 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $6.4 million position. Other investors bullish on the company included Arrowstreet Capital, Two Sigma Advisors, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Murphy Oil Corporation (NYSE:MUR), around 0.16% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to MUR.

Judging by the fact that Murphy Oil Corporation (NYSE:MUR) has experienced falling interest from the smart money, we can see that there was a specific group of hedgies that decided to sell off their entire stakes heading into Q4. Interestingly, Till Bechtolsheimer’s Arosa Capital Management said goodbye to the biggest investment of the “upper crust” of funds followed by Insider Monkey, worth about $8.4 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $1.8 million worth. These transactions are important to note, as total hedge fund interest dropped by 4 funds heading into Q4.

Let’s now review hedge fund activity in other stocks similar to Murphy Oil Corporation (NYSE:MUR). We will take a look at Aimmune Therapeutics Inc (NASDAQ:AIMT), NuStar Energy L.P. (NYSE:NS), ATN International, Inc. (NASDAQ:ATNI), and SecureWorks Corp. (NASDAQ:SCWX). This group of stocks’ market caps match MUR’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AIMT 18 138411 5
NS 4 8087 -3
ATNI 8 59085 -1
SCWX 11 11882 -3
Average 10.25 54366 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $46 million in MUR’s case. Aimmune Therapeutics Inc (NASDAQ:AIMT) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Murphy Oil Corporation (NYSE:MUR) is more popular among hedge funds. 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 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on MUR as the stock returned 132.1% since Q1 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.