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Hedge Funds Aren’t Crazy About Murphy USA Inc. (MUSA) Anymore

·6 min read

With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Murphy USA Inc. (NYSE:MUSA).

Is Murphy USA Inc. (NYSE:MUSA) a superb investment today? Hedge funds were in a bearish mood. The number of long hedge fund positions were cut by 7 in recent months. Murphy USA Inc. (NYSE:MUSA) was in 19 hedge funds' portfolios at the end of March. The all time high for this statistic is 28. Our calculations also showed that MUSA isn't among the 30 most popular stocks among hedge funds (click for Q1 rankings).

According to most investors, hedge funds are viewed as slow, outdated investment vehicles of years past. While there are more than 8000 funds with their doors open at the moment, Our researchers hone in on the bigwigs of this club, approximately 850 funds. Most estimates calculate that this group of people handle the majority of the smart money's total capital, and by tailing their matchless stock picks, Insider Monkey has discovered many investment strategies that have historically surpassed the S&P 500 index. Insider Monkey's flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .

Bruce Kovner, Caxton Associates LP
Bruce Kovner, Caxton Associates LP

Bruce Kovner of Caxton Associates LP

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Do Hedge Funds Think MUSA Is A Good Stock To Buy Now?

At Q1's end, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -27% from the previous quarter. By comparison, 24 hedge funds held shares or bullish call options in MUSA a year ago. With hedgies' positions undergoing their usual ebb and flow, there exists an "upper tier" of key hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).

Is MUSA A Good Stock To Buy?
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 $106.7 million reported as of the end of March. Trailing Renaissance Technologies was AQR Capital Management, which amassed a stake valued at $39 million. D E Shaw, Arrowstreet Capital, and Citadel Investment Group 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 Renaissance Technologies allocated the biggest weight to Murphy USA Inc. (NYSE:MUSA), around 0.13% of its 13F portfolio. AlphaCrest Capital Management is also relatively very bullish on the stock, designating 0.12 percent of its 13F equity portfolio to MUSA.

Because Murphy USA Inc. (NYSE:MUSA) has experienced falling interest from hedge fund managers, logic holds that there is a sect of funds that decided to sell off their positions entirely by the end of the first quarter. It's worth mentioning that Mark Coe's Intrinsic Edge Capital said goodbye to the biggest stake of the 750 funds monitored by Insider Monkey, comprising about $9 million in stock, and Brian Scudieri's Kehrs Ridge Capital was right behind this move, as the fund said goodbye to about $7.2 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 7 funds by the end of the first quarter.

Let's now take a look at hedge fund activity in other stocks similar to Murphy USA Inc. (NYSE:MUSA). These stocks are SeaWorld Entertainment Inc (NYSE:SEAS), Millicom International Cellular S.A. (NASDAQ:TIGO), Progyny, Inc. (NASDAQ:PGNY), New Relic Inc (NYSE:NEWR), EnerSys (NYSE:ENS), Umpqua Holdings Corp (NASDAQ:UMPQ), and Brighthouse Financial, Inc. (NASDAQ:BHF). This group of stocks' market caps are closest to MUSA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SEAS,39,1881920,6 TIGO,5,42136,-1 PGNY,26,221476,2 NEWR,27,1141779,-3 ENS,28,119582,4 UMPQ,25,245140,2 BHF,28,539727,-5 Average,25.4,598823,0.7 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 25.4 hedge funds with bullish positions and the average amount invested in these stocks was $599 million. That figure was $265 million in MUSA's case. SeaWorld Entertainment Inc (NYSE:SEAS) is the most popular stock in this table. On the other hand Millicom International Cellular S.A. (NASDAQ:TIGO) is the least popular one with only 5 bullish hedge fund positions. Murphy USA Inc. (NYSE:MUSA) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for MUSA is 38.9. 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. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 23.8% in 2021 through July 16th and surpassed the market again by 7.7 percentage points. Unfortunately MUSA wasn't nearly as popular as these 5 stocks (hedge fund sentiment was quite bearish); MUSA investors were disappointed as the stock returned -1.6% since the end of March (through 7/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2021.

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