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We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn't mean that they don't have occasional colossal losses; they do (like Melvin Capital's recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards Marathon Oil Corporation (NYSE:MRO).
Is Marathon Oil Corporation (NYSE:MRO) a good stock to buy? Investors who are in the know were buying. The number of long hedge fund positions advanced by 5 lately. Marathon Oil Corporation (NYSE:MRO) was in 34 hedge funds' portfolios at the end of June. The all time high for this statistic is 39. Our calculations also showed that MRO isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 29 hedge funds in our database with MRO positions at the end of the first quarter.
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. Hedge funds have more than $3.5 trillion in assets under management, so you can't expect their entire portfolios to beat the market by large margins. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). So you can still find a lot of gems by following hedge funds' moves today.
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's take a gander at the fresh hedge fund action surrounding Marathon Oil Corporation (NYSE:MRO).
Do Hedge Funds Think MRO Is A Good Stock To Buy Now?
Heading into the third quarter of 2021, a total of 34 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 17% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards MRO over the last 24 quarters. So, let's check out 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, D. E. Shaw's D E Shaw has the most valuable position in Marathon Oil Corporation (NYSE:MRO), worth close to $126.8 million, accounting for 0.1% of its total 13F portfolio. Coming in second is Israel Englander of Millennium Management, with a $118.9 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Some other peers that are bullish encompass Ken Fisher's Fisher Asset Management, John Overdeck and David Siegel's Two Sigma Advisors and Steve Cohen's Point72 Asset Management. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Marathon Oil Corporation (NYSE:MRO), around 5.03% of its 13F portfolio. Encompass Capital Advisors is also relatively very bullish on the stock, earmarking 1.78 percent of its 13F equity portfolio to MRO.
Consequently, specific money managers have been driving this bullishness. SIR Capital Management, managed by Vince Maddi and Shawn Brennan, assembled the most valuable position in Marathon Oil Corporation (NYSE:MRO). SIR Capital Management had $34 million invested in the company at the end of the quarter. Anand Parekh's Alyeska Investment Group also made a $14.1 million investment in the stock during the quarter. The other funds with brand new MRO positions are Renaissance Technologies, Scott Bessent's Key Square Capital Management, and Sander Gerber's Hudson Bay Capital Management.
Let's check out hedge fund activity in other stocks similar to Marathon Oil Corporation (NYSE:MRO). We will take a look at PRA Health Sciences Inc (NASDAQ:PRAH), The Scotts Miracle-Gro Company (NYSE:SMG), Deckers Outdoor Corp (NASDAQ:DECK), ChargePoint Holdings, Inc. (NYSE:CHPT), ironSource Ltd. (NYSE:IS), American Financial Group (NYSE:AFG), and Brookfield Renewable Partners L.P. (NYSE:BEP). 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 PRAH,43,2995527,8 SMG,32,369779,-2 DECK,44,1473505,4 CHPT,17,149306,-7 IS,32,771885,-20 AFG,19,219952,-2 BEP,20,232664,-4 Average,29.6,887517,-3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.6 hedge funds with bullish positions and the average amount invested in these stocks was $888 million. That figure was $656 million in MRO's case. Deckers Outdoor Corp (NASDAQ:DECK) is the most popular stock in this table. On the other hand ChargePoint Holdings, Inc. (NYSE:CHPT) is the least popular one with only 17 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 overall hedge fund sentiment score for MRO is 67.6. 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. 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 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on MRO as the stock returned 17.6% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.