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Murphy USA Inc. (MUSA): Hedge Fund Interest Is Cooling Down

In this article you are going to find out whether hedge funds think Murphy USA Inc. (NYSE:MUSA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It’s not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Murphy USA Inc. (NYSE:MUSA) a buy, sell, or hold? Investors who are in the know are becoming less hopeful. The number of long hedge fund bets were cut by 4 in recent months. Our calculations also showed that MUSA 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 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.

Steven Cohen of Point72 Asset Management

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out trades like this one. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. 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 the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s check out the latest hedge fund action regarding Murphy USA Inc. (NYSE:MUSA).

Hedge fund activity in Murphy USA Inc. (NYSE:MUSA)

At Q1’s end, a total of 24 of the hedge funds tracked by Insider Monkey were long this stock, a change of -14% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MUSA over the last 18 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MUSA A Good Stock To Buy?

More specifically, Renaissance Technologies was the largest shareholder of Murphy USA Inc. (NYSE:MUSA), with a stake worth $57.3 million reported as of the end of September. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $47.5 million. Arrowstreet Capital, GLG Partners, and Millennium 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 Winton Capital Management allocated the biggest weight to Murphy USA Inc. (NYSE:MUSA), around 0.23% of its 13F portfolio. Quantinno Capital is also relatively very bullish on the stock, setting aside 0.21 percent of its 13F equity portfolio to MUSA.

Because Murphy USA Inc. (NYSE:MUSA) has faced a decline in interest from the aggregate hedge fund industry, it’s safe to say that there was a specific group of funds who were dropping their positions entirely heading into Q4. Intriguingly, Mario Gabelli’s GAMCO Investors said goodbye to the largest stake of all the hedgies monitored by Insider Monkey, valued at about $7.7 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also sold off its stock, about $3.6 million worth. These moves are interesting, as total hedge fund interest fell by 4 funds heading into Q4.

Let’s check out hedge fund activity in other stocks similar to Murphy USA Inc. (NYSE:MUSA). We will take a look at AMN Healthcare Services Inc (NYSE:AMN), The Hain Celestial Group, Inc. (NASDAQ:HAIN), Appian Corporation (NASDAQ:APPN), and Farfetch Limited (NYSE:FTCH). This group of stocks’ market values are closest to MUSA’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
AMN 22 78978 12
HAIN 20 704604 3
APPN 17 374002 0
FTCH 22 400841 -5
Average 20.25 389606 2.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 20.25 hedge funds with bullish positions and the average amount invested in these stocks was $390 million. That figure was $198 million in MUSA’s case. AMN Healthcare Services Inc (NYSE:AMN) is the most popular stock in this table. On the other hand Appian Corporation (NASDAQ:APPN) is the least popular one with only 17 bullish hedge fund positions. Compared to these stocks Murphy USA Inc. (NYSE:MUSA) 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 13.9% in 2020 through June 10th but still managed to beat the market by 14.2 percentage points. Hedge funds were also right about betting on MUSA as the stock returned 37.5% so far in Q2 (through June 10th) 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.