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Should You Buy Murphy USA Inc. (MUSA)?

Concerns over rising interest rates and expected further rate increases have hit several stocks hard since the end of the third quarter. NASDAQ and Russell 2000 indices are already in correction territory. More importantly, Russell 2000 ETF (IWM) underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points in the first half of the fourth quarter. 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 paring back their overall exposure 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) was in 19 hedge funds’ portfolios at the end of September. MUSA has experienced an increase in activity from the world’s largest hedge funds lately. There were 16 hedge funds in our database with MUSA positions at the end of the previous quarter. Our calculations also showed that musa isn’t among the 30 most popular stocks among hedge funds.

To most shareholders, hedge funds are seen as slow, old investment vehicles of years past. While there are greater than 8,000 funds with their doors open at present, We hone in on the top tier of this club, approximately 700 funds. These hedge fund managers control the majority of the smart money’s total asset base, and by monitoring their matchless investments, Insider Monkey has uncovered many investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship hedge fund strategy outstripped the S&P 500 index by 6 percentage points per annum since its inception in May 2014 through early November 2018. We were able to generate large returns even by identifying short candidates. Our portfolio of short stocks lost 24% since February 2017 (through December 3rd) even though the market was up nearly 23% during the same period. We just shared a list of 11 short targets in our latest quarterly update.

Mario Gabelli

We’re going to take a gander at the latest hedge fund action regarding Murphy USA Inc. (NYSE:MUSA).

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

At Q3’s end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 19% from the previous quarter. The graph below displays the number of hedge funds with bullish position in MUSA over the last 13 quarters. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with MUSA Positions

More specifically, AQR Capital Management was the largest shareholder of Murphy USA Inc. (NYSE:MUSA), with a stake worth $57.6 million reported as of the end of September. Trailing AQR Capital Management was Two Sigma Advisors, which amassed a stake valued at $24 million. Citadel Investment Group, GLG Partners, and GAMCO Investors were also very fond of the stock, giving the stock large weights in their portfolios.

Now, some big names have been driving this bullishness. Millennium Management, managed by Israel Englander, established the most outsized position in Murphy USA Inc. (NYSE:MUSA). Millennium Management had $9.6 million invested in the company at the end of the quarter. Mike Vranos’s Ellington also made a $2.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Roger Ibbotson’s Zebra Capital Management, John A. Levin’s Levin Capital Strategies, and Frederick DiSanto’s Ancora 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. These stocks are AlarmCom Holdings Inc (NASDAQ:ALRM), First Midwest Bancorp Inc (NASDAQ:FMBI), HMS Holdings Corp. (NASDAQ:HMSY), and Ormat Technologies, Inc. (NYSE:ORA). All of these stocks’ market caps are closest to MUSA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ALRM 12 259097 -3
FMBI 8 67244 -3
HMSY 16 65374 5
ORA 7 158115 -1
Average 10.75 137458 -0.5

View table here if you experience formatting issues.

As you can see these stocks had an average of 10.75 hedge funds with bullish positions and the average amount invested in these stocks was $137 million. That figure was $173 million in MUSA’s case. HMS Holdings Corp. (NASDAQ:HMSY) is the most popular stock in this table. On the other hand Ormat Technologies, Inc. (NYSE:ORA) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Murphy USA Inc. (NYSE:MUSA) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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

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