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Did Hedge Funds Drop The Ball On Murphy Oil Corporation (MUR) ?

Reymerlyn Martin

Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 750 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds' recent losses in Facebook. Let’s take a closer look at what the funds we track think about Murphy Oil Corporation (NYSE:MUR) in this article.

Is Murphy Oil Corporation (NYSE:MUR) a bargain? Investors who are in the know are in a bearish mood. The number of long hedge fund bets retreated by 5 in recent months. Our calculations also showed that MUR isn't among the 30 most popular stocks among hedge funds.

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 market by 32 percentage points since May 2014 through March 12, 2019 (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.

Richard Pzena - Pzena Investment Management

Let's view the latest hedge fund action encompassing Murphy Oil Corporation (NYSE:MUR).

What have hedge funds been doing with Murphy Oil Corporation (NYSE:MUR)?

At Q4's end, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -22% from the second quarter of 2018. On the other hand, there were a total of 21 hedge funds with a bullish position in MUR a year ago. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

MUR_apr2019

Among these funds, Pzena Investment Management held the most valuable stake in Murphy Oil Corporation (NYSE:MUR), which was worth $45.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $37.5 million worth of shares. Moreover, D E Shaw, Two Sigma Advisors, and Bridgewater Associates were also bullish on Murphy Oil Corporation (NYSE:MUR), allocating a large percentage of their portfolios to this stock.

Due to the fact that Murphy Oil Corporation (NYSE:MUR) has experienced a decline in interest from the aggregate hedge fund industry, we can see that there were a few hedgies who sold off their positions entirely heading into Q3. At the top of the heap, Sara Nainzadeh's Centenus Global Management said goodbye to the largest stake of the 700 funds followed by Insider Monkey, worth about $7.2 million in stock. Andrew Feldstein and Stephen Siderow's fund, Blue Mountain Capital, also sold off its stock, about $2.6 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 5 funds heading into Q3.

Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Murphy Oil Corporation (NYSE:MUR) but similarly valued. We will take a look at New Jersey Resources Corp (NYSE:NJR), Assured Guaranty Ltd. (NYSE:AGO), Williams-Sonoma, Inc. (NYSE:WSM), and CIT Group Inc. (NYSE:CIT). This group of stocks' market values are similar to MUR's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NJR,18,92769,6 AGO,33,571123,0 WSM,17,284244,-6 CIT,26,600235,1 Average,23.5,387093,0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.5 hedge funds with bullish positions and the average amount invested in these stocks was $387 million. That figure was $182 million in MUR's case. Assured Guaranty Ltd. (NYSE:AGO) is the most popular stock in this table. On the other hand Williams-Sonoma, Inc. (NYSE:WSM) is the least popular one with only 17 bullish hedge fund positions. Murphy Oil Corporation (NYSE:MUR) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on MUR, though not to the same extent, as the stock returned 23.5% and outperformed the market as well.

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

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