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At Insider Monkey, we pore over the filings of nearly 817 top investment firms every quarter, a process we have now completed for the latest reporting period. The data we've gathered as a result gives us access to a wealth of collective knowledge based on these firms' portfolio holdings as of September 30. In this article, we will use that wealth of knowledge to determine whether or not Marathon Petroleum Corp (NYSE:MPC) makes for a good investment right now.
Is Marathon Petroleum (MPC) a good stock to buy now? Hedge funds were in a pessimistic mood. The number of long hedge fund bets shrunk by 6 in recent months. Marathon Petroleum Corp (NYSE:MPC) was in 56 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistics is 72. Our calculations also showed that MPC isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Sander Gerber of Hudson Bay Capital
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, we believe electric vehicles and energy storage are set to become giant markets. Tesla’s stock price skyrocketed, yet lithium prices are still below their 2019 highs. So, we are checking out this lithium stock right now. We go through lists like the 15 best blue chip stocks to buy to pick the best large-cap stocks to buy. 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 website. With all of this in mind we're going to go over the latest hedge fund action encompassing Marathon Petroleum Corp (NYSE:MPC).
How are hedge funds trading Marathon Petroleum Corp (NYSE:MPC)?
At Q3's end, a total of 56 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in MPC over the last 21 quarters. With hedge funds' capital changing hands, there exists a few noteworthy hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
More specifically, Elliott Investment Management was the largest shareholder of Marathon Petroleum Corp (NYSE:MPC), with a stake worth $283.7 million reported as of the end of September. Trailing Elliott Investment Management was Elliott Investment Management, which amassed a stake valued at $117.4 million. Holocene Advisors, Millennium Management, and Empyrean Capital Partners 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 Scopia Capital allocated the biggest weight to Marathon Petroleum Corp (NYSE:MPC), around 7.2% of its 13F portfolio. Proxima Capital Management is also relatively very bullish on the stock, setting aside 6.69 percent of its 13F equity portfolio to MPC.
Due to the fact that Marathon Petroleum Corp (NYSE:MPC) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few funds who sold off their entire stakes last quarter. It's worth mentioning that Frank Brosens's Taconic Capital cut the biggest position of the 750 funds watched by Insider Monkey, worth an estimated $33.8 million in stock. Steve Cohen's fund, Point72 Asset Management, also said goodbye to its stock, about $27.7 million worth. These moves are important to note, as aggregate hedge fund interest fell by 6 funds last quarter.
Let's now take a look at hedge fund activity in other stocks similar to Marathon Petroleum Corp (NYSE:MPC). These stocks are Fortinet Inc (NASDAQ:FTNT), Equifax Inc. (NYSE:EFX), Fortis Inc. (NYSE:FTS), Canadian Natural Resources Limited (NYSE:CNQ), Take-Two Interactive Software, Inc. (NASDAQ:TTWO), Coupa Software Incorporated (NASDAQ:COUP), and First Republic Bank (NYSE:FRC). All of these stocks' market caps match MPC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FTNT,36,1291884,-8 EFX,42,1266273,14 FTS,8,411986,0 CNQ,30,233173,2 TTWO,52,1289470,-9 COUP,50,3191469,0 FRC,31,1221714,-6 Average,35.6,1272281,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 35.6 hedge funds with bullish positions and the average amount invested in these stocks was $1272 million. That figure was $1071 million in MPC's case. Take-Two Interactive Software, Inc. (NASDAQ:TTWO) is the most popular stock in this table. On the other hand Fortis Inc. (NYSE:FTS) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks Marathon Petroleum Corp (NYSE:MPC) is more popular among hedge funds. Our overall hedge fund sentiment score for MPC is 72.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks returned 31.6% in 2020 through December 2nd but still managed to beat the market by 16 percentage points. Hedge funds were also right about betting on MPC as the stock returned 40.3% since the end of September (through 12/2) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.
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Disclosure: None. This article was originally published at Insider Monkey.