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Is Murphy USA Inc. (MUSA) Going To Burn These Hedge Funds ?

Concerns over rising interest rates and expected further rate increases have hit several stocks hard during the fourth quarter of 2018. Trends reversed 180 degrees during the first half of 2019 amid Powell’s pivot and optimistic expectations towards a trade deal with China. Hedge funds and institutional investors tracked by Insider Monkey usually invest a disproportionate amount of their portfolios in smaller cap stocks. We have been receiving indications that hedge funds were increasing their overall exposure in the second quarter and this is one of the factors behind the recent movements in major indices. In this article, we will take a closer look at hedge fund sentiment towards Murphy USA Inc. (NYSE:MUSA).

Murphy USA Inc. (NYSE:MUSA) has seen a decrease in hedge fund sentiment lately. Our calculations also showed that MUSA isn’t among the 30 most popular stocks among hedge funds (view the video below).
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

Why do we pay any attention at all to hedge fund sentiment? 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 market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

MUSA_oct2019

Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. Let’s take a peek at the fresh hedge fund action encompassing Murphy USA Inc. (NYSE:MUSA).

What have hedge funds been doing with Murphy USA Inc. (NYSE:MUSA)?

At Q2’s end, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the first quarter of 2019. The graph below displays the number of hedge funds with bullish position in MUSA over the last 16 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Charles Davidson - Wexford Capital

When looking at the institutional investors followed by Insider Monkey, Cliff Asness’s AQR Capital Management has the largest position in Murphy USA Inc. (NYSE:MUSA), worth close to $61.7 million, comprising 0.1% of its total 13F portfolio. On AQR Capital Management’s heels is Peter Rathjens, Bruce Clarke and John Campbell of Arrowstreet Capital, with a $57.6 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining professional money managers that hold long positions consist of Renaissance Technologies, Noam Gottesman’s GLG Partners and Mario Gabelli’s GAMCO Investors.

Seeing as Murphy USA Inc. (NYSE:MUSA) has faced a decline in interest from the aggregate hedge fund industry, logic holds that there exists a select few money managers who sold off their full holdings by the end of the second quarter. Interestingly, Wallace Weitz’s Wallace R. Weitz & Co. cut the biggest position of the 750 funds watched by Insider Monkey, worth about $3.4 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund dropped about $3.3 million worth. These moves are interesting, as total hedge fund interest dropped by 2 funds by the end of the second quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Murphy USA Inc. (NYSE:MUSA) but similarly valued. We will take a look at Cedar Fair, L.P. (NYSE:FUN), Quaker Chemical Corp (NYSE:KWR), Stantec Inc. (NYSE:STN), and BlackLine, Inc. (NASDAQ:BL). This group of stocks’ market valuations resemble MUSA’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
FUN 8 46860 0
KWR 13 150464 2
STN 6 71062 1
BL 15 94921 -5
Average 10.5 90827 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.5 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $207 million in MUSA’s case. BlackLine, Inc. (NASDAQ:BL) is the most popular stock in this table. On the other hand Stantec Inc. (NYSE:STN) is the least popular one with only 6 bullish hedge fund positions. Compared to these stocks Murphy USA Inc. (NYSE:MUSA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MUSA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MUSA were disappointed as the stock returned 1.5% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market in Q3.

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

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