Is MUSA Stock A Buy or Sell?

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 fourth 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 5 years and analyze what the smart money thinks of Murphy USA Inc. (NYSE:MUSA) based on that data.

Is MUSA stock a buy? Investors who are in the know were taking a bullish view. The number of bullish hedge fund positions rose by 3 lately. Murphy USA Inc. (NYSE:MUSA) was in 26 hedge funds’ portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 28. Our calculations also showed that MUSA isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 23 hedge funds in our database with MUSA holdings at the end of September.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 more than 124 percentage points since March 2017 (see the details here).

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, the CBD market is growing at a 33% annualized rate, so we are taking a closer look at this under-the-radar hemp stock. We go through lists like the 10 best biotech stocks under $10 to identify the next stock with 10x upside potential. 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. With all of this in mind let’s take a look at the recent hedge fund action encompassing Murphy USA Inc. (NYSE:MUSA).

Do Hedge Funds Think MUSA Is A Good Stock To Buy Now?

Heading into the first quarter of 2021, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MUSA over the last 22 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of notable hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

Of the funds tracked by Insider Monkey, Renaissance Technologies, holds the most valuable position in Murphy USA Inc. (NYSE:MUSA). Renaissance Technologies has a $112.9 million position in the stock, comprising 0.1% of its 13F portfolio. The second largest stake is held by AQR Capital Management, led by Cliff Asness, holding a $29.7 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining professional money managers that hold long positions encompass D. E. Shaw’s D E Shaw, Ken Griffin’s Citadel Investment Group and Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital. In terms of the portfolio weights assigned to each position Kehrs Ridge Capital allocated the biggest weight to Murphy USA Inc. (NYSE:MUSA), around 2.62% of its 13F portfolio. Matarin Capital is also relatively very bullish on the stock, earmarking 0.85 percent of its 13F equity portfolio to MUSA.

Now, specific money managers were leading the bulls’ herd. Intrinsic Edge Capital, managed by Mark Coe, established the largest position in Murphy USA Inc. (NYSE:MUSA). Intrinsic Edge Capital had $9 million invested in the company at the end of the quarter. Brian Scudieri’s Kehrs Ridge Capital also made a $7.2 million investment in the stock during the quarter. The following funds were also among the new MUSA investors: Dmitry Balyasny’s Balyasny Asset Management, Paul Tudor Jones’s Tudor Investment Corp, and Brandon Haley’s Holocene Advisors.

Let’s now review 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 Rackspace Technology, Inc. (NASDAQ:RXT), Sabre Corporation (NASDAQ:SABR), Webster Financial Corporation (NYSE:WBS), Granite Real Estate Investment Trust (NYSE:GRP), Cerence Inc. (NASDAQ:CRNC), Braskem SA (NYSE:BAK), and National Fuel Gas Company (NYSE:NFG). This group of stocks’ market caps match MUSA’s market cap.

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As you can see these stocks had an average of 18.1 hedge funds with bullish positions and the average amount invested in these stocks was $303 million. That figure was $290 million in MUSA’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand Granite Real Estate Investment Trust (NYSE:GRP) is the least popular one with only 6 bullish hedge fund positions. Murphy USA Inc. (NYSE:MUSA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MUSA is 60.9. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and beat the market again by 0.9 percentage points. Unfortunately MUSA wasn’t nearly as popular as these 30 stocks and hedge funds that were betting on MUSA were disappointed as the stock returned 8.6% since the end of December (through 4/19) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 30 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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