Were Hedge Funds Right About Marathon Petroleum Corp (MPC)?

We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).

In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the fourth quarter, which unveil their equity positions as of December 31. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards Marathon Petroleum Corp (NYSE:MPC).

Is Marathon Petroleum Corp (NYSE:MPC) a superb investment today? Investors who are in the know are taking an optimistic view. The number of bullish hedge fund bets moved up by 1 recently. Our calculations also showed that MPC isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 41 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Stanley Druckenmiller of Duquesne Capital

We leave no stone unturned when looking for the next great investment idea. For example, this trader is claiming triple digit returns, so we check out his latest trade recommendations. Federal Reserve and Central Banks all around world are printing money like there is no tomorrow, so we check out this this precious metals expert’s stock pick. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences (by the way watch this video if you want to hear one of the best healthcare hedge fund manager’s coronavirus analysis). Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a gander at the new hedge fund action regarding Marathon Petroleum Corp (NYSE:MPC).

How are hedge funds trading Marathon Petroleum Corp (NYSE:MPC)?

At Q4’s end, a total of 69 of the hedge funds tracked by Insider Monkey were long this stock, a change of 1% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards MPC over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

When looking at the institutional investors followed by Insider Monkey, Paul Singer’s Elliott Management has the largest position in Marathon Petroleum Corp (NYSE:MPC), worth close to $581.3 million, accounting for 4.9% of its total 13F portfolio. On Elliott Management’s heels is D E Shaw, managed by D. E. Shaw, which holds a $314.9 million call position; 0.4% of its 13F portfolio is allocated to the company. Remaining professional money managers with similar optimism include Robert Pitts’s Steadfast Capital Management, David Cohen and Harold Levy’s Iridian Asset Management and Israel Englander’s Millennium Management. In terms of the portfolio weights assigned to each position Swift Run Capital Management allocated the biggest weight to Marathon Petroleum Corp (NYSE:MPC), around 10.83% of its 13F portfolio. Swift Run Capital Management is also relatively very bullish on the stock, designating 5.13 percent of its 13F equity portfolio to MPC.

Consequently, some big names were breaking ground themselves. Renaissance Technologies, created the most outsized position in Marathon Petroleum Corp (NYSE:MPC). Renaissance Technologies had $144.1 million invested in the company at the end of the quarter. Stanley Druckenmiller’s Duquesne Capital also initiated a $44.3 million position during the quarter. The other funds with new positions in the stock are Paul Tudor Jones’s Tudor Investment Corp, Anand Parekh’s Alyeska Investment Group, and Frank Brosens’s Taconic Capital.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Marathon Petroleum Corp (NYSE:MPC) but similarly valued. We will take a look at The Royal Bank of Scotland Group plc (NYSE:RBS), AFLAC Incorporated (NYSE:AFL), Orange S.A. (NYSE:ORAN), and Valero Energy Corporation (NYSE:VLO). All of these stocks’ market caps are closest to MPC’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RBS 5 37114 0
AFL 32 511962 1
ORAN 2 606 -2
VLO 46 636299 9
Average 21.25 296495 2

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.25 hedge funds with bullish positions and the average amount invested in these stocks was $296 million. That figure was $2759 million in MPC’s case. Valero Energy Corporation (NYSE:VLO) is the most popular stock in this table. On the other hand Orange S.A. (NYSE:ORAN) is the least popular one with only 2 bullish hedge fund positions. Compared to these stocks Marathon Petroleum Corp (NYSE:MPC) 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 lost 1.0% in 2020 through April 20th and still beat the market by 11 percentage points. Unfortunately MPC wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on MPC were disappointed as the stock returned -58.3% during the three months of 2020 (through April 20th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

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