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Murphy USA Inc. (MUSA): Hedge Fund Interest Inching Up

The latest 13F reporting period has come and gone, and Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Since the end of March, investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned more than 50% since its bottom. In this article you are going to find out whether hedge funds thought Murphy USA Inc. (NYSE:MUSA) was a good investment heading into the third quarter and how the stock traded in comparison to the top hedge fund picks.

Is Murphy USA Inc. (NYSE:MUSA) a first-rate investment now? Prominent investors were getting more bullish. The number of long hedge fund bets moved up by 3 in recent months. Murphy USA Inc. (NYSE:MUSA) was in 27 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 28. Our calculations also showed that MUSA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 24 hedge funds in our database with MUSA holdings at the end of March.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Peter Rathjens Arrowstreet Capital 394

Peter Rathjens of Arrowstreet Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. 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. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. Now we’re going to take a look at the new hedge fund action encompassing Murphy USA Inc. (NYSE:MUSA).

What does smart money think about Murphy USA Inc. (NYSE:MUSA)?

At second quarter’s end, a total of 27 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 13% from the first quarter of 2020. On the other hand, there were a total of 19 hedge funds with a bullish position in MUSA a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Renaissance Technologies held the most valuable stake in Murphy USA Inc. (NYSE:MUSA), which was worth $100.2 million at the end of the third quarter. On the second spot was AQR Capital Management which amassed $47.1 million worth of shares. Junto Capital Management, Millennium Management, and Arrowstreet Capital 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 Junto Capital Management allocated the biggest weight to Murphy USA Inc. (NYSE:MUSA), around 1.8% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, setting aside 0.3 percent of its 13F equity portfolio to MUSA.

As one would reasonably expect, some big names were breaking ground themselves. Junto Capital Management, managed by James Parsons, initiated the biggest position in Murphy USA Inc. (NYSE:MUSA). Junto Capital Management had $42.2 million invested in the company at the end of the quarter. Qing Li’s Sciencast Management also made a $0.5 million investment in the stock during the quarter. The other funds with brand new MUSA positions are Peter Muller’s PDT Partners, Ran Pang’s Quantamental Technologies, and Jinghua Yan’s TwinBeech Capital.

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 AutoNation, Inc. (NYSE:AN), Kohl’s Corporation (NYSE:KSS), Brooks Automation, Inc. (NASDAQ:BRKS), AVITA Therapeutics, Inc. (NASDAQ:RCEL), Xerox Holdings Corporation (NYSE:XRX), Cohen & Steers, Inc. (NYSE:CNS), and Energizer Holdings, Inc. (NYSE:ENR). This group of stocks’ market values match MUSA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AN 29 293932 2
KSS 42 337352 16
BRKS 15 163794 -3
RCEL 2 30930 -1
XRX 35 679082 -6
CNS 21 86926 1
ENR 25 277086 4
Average 24.1 267015 1.9

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $267 million. That figure was $301 million in MUSA’s case. Kohl’s Corporation (NYSE:KSS) is the most popular stock in this table. On the other hand AVITA Therapeutics, Inc. (NASDAQ:RCEL) is the least popular one with only 2 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 68.2. 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. 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 21.3% in 2020 through September 25th and still beat the market by 17.7 percentage points. Hedge funds were also right about betting on MUSA as the stock returned 16.3% during Q3 (through September 25th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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