In this article we will check out the progression of hedge fund sentiment towards Marathon Oil Corporation (NYSE:MRO) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Is Marathon Oil Corporation (NYSE:MRO) a bargain? Money managers are turning less bullish. The number of long hedge fund positions shrunk by 6 in recent months. Our calculations also showed that MRO 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). MRO was in 24 hedge funds' portfolios at the end of the first quarter of 2020. There were 30 hedge funds in our database with MRO holdings at the end of the previous quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 58 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
[caption id="attachment_30600" align="aligncenter" width="400"] Bruce Kovner of Caxton Associates LP[/caption]
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. Now we're going to view the latest hedge fund action surrounding Marathon Oil Corporation (NYSE:MRO).
How have hedgies been trading Marathon Oil Corporation (NYSE:MRO)?
At the end of the first quarter, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -20% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards MRO 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Ken Fisher's Fisher Asset Management has the most valuable position in Marathon Oil Corporation (NYSE:MRO), worth close to $20.8 million, comprising less than 0.1%% of its total 13F portfolio. Sitting at the No. 2 spot is John Overdeck and David Siegel of Two Sigma Advisors, with a $17.3 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining members of the smart money with similar optimism include Renaissance Technologies, D. E. Shaw's D E Shaw and Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital. In terms of the portfolio weights assigned to each position PDT Partners allocated the biggest weight to Marathon Oil Corporation (NYSE:MRO), around 0.3% of its 13F portfolio. Caxton Associates LP is also relatively very bullish on the stock, dishing out 0.24 percent of its 13F equity portfolio to MRO.
Seeing as Marathon Oil Corporation (NYSE:MRO) has faced falling interest from the smart money, it's safe to say that there lies a certain "tier" of hedge funds who were dropping their full holdings by the end of the first quarter. At the top of the heap, Steve Cohen's Point72 Asset Management cut the largest position of the 750 funds monitored by Insider Monkey, valued at close to $86.5 million in stock. Todd J. Kantor's fund, Encompass Capital Advisors, also dumped its stock, about $77 million worth. These bearish behaviors are interesting, as aggregate hedge fund interest fell by 6 funds by the end of the first quarter.
Let's also examine hedge fund activity in other stocks similar to Marathon Oil Corporation (NYSE:MRO). We will take a look at World Wrestling Entertainment, Inc. (NYSE:WWE), Yamana Gold Inc. (NYSE:AUY), Power Integrations Inc (NASDAQ:POWI), and The Gap Inc. (NYSE:GPS). All of these stocks' market caps match MRO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WWE,31,374902,1 AUY,14,212094,-2 POWI,21,76700,4 GPS,24,48879,-7 Average,22.5,178144,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 22.5 hedge funds with bullish positions and the average amount invested in these stocks was $178 million. That figure was $93 million in MRO's case. World Wrestling Entertainment, Inc. (NYSE:WWE) is the most popular stock in this table. On the other hand Yamana Gold Inc. (NYSE:AUY) is the least popular one with only 14 bullish hedge fund positions. Marathon Oil Corporation (NYSE:MRO) is not the most popular stock in this group but hedge fund interest is still above average. 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 gained 13.9% in 2020 through June 10th but still beat the market by 14.2 percentage points. Hedge funds were also right about betting on MRO as the stock returned 116.1% in Q2 (through June 10th) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.