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Murphy USA Inc. (MUSA): Hedge Funds Are Snapping Up

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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 900 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Murphy USA Inc. (NYSE:MUSA).

Murphy USA Inc. (NYSE:MUSA) investors should pay attention to an increase in activity from the world's largest hedge funds lately. Murphy USA Inc. (NYSE:MUSA) was in 26 hedge funds' portfolios at the end of June. The all time high for this statistic is 28. There were 19 hedge funds in our database with MUSA holdings at the end of March. Our calculations also showed that MUSA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Dmitry Balyasny of Balyasny Asset Managemnet
Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Now let's take a peek at the recent hedge fund action regarding Murphy USA Inc. (NYSE:MUSA).

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

At Q2's end, a total of 26 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 37% from the first quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in MUSA a year ago. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is MUSA A Good Stock To Buy?
Is MUSA A Good Stock To Buy?

The largest stake in Murphy USA Inc. (NYSE:MUSA) was held by Renaissance Technologies, which reported holding $82.7 million worth of stock at the end of June. It was followed by Junto Capital Management with a $37.4 million position. Other investors bullish on the company included AQR Capital Management, Arrowstreet Capital, and Balyasny Asset Management. In terms of the portfolio weights assigned to each position Junto Capital Management allocated the biggest weight to Murphy USA Inc. (NYSE:MUSA), around 1.19% of its 13F portfolio. Weld Capital Management is also relatively very bullish on the stock, setting aside 0.44 percent of its 13F equity portfolio to MUSA.

As aggregate interest increased, specific money managers were breaking ground themselves. Junto Capital Management, managed by James Parsons, created the most valuable position in Murphy USA Inc. (NYSE:MUSA). Junto Capital Management had $37.4 million invested in the company at the end of the quarter. Steve Cohen's Point72 Asset Management also made a $9.9 million investment in the stock during the quarter. The other funds with new positions in the stock are Jinghua Yan's TwinBeech Capital, Greg Eisner's Engineers Gate Manager, and Qing Li's Sciencast Management.

Let's now take a look at hedge fund activity in other stocks - not necessarily in the same industry as Murphy USA Inc. (NYSE:MUSA) but similarly valued. We will take a look at Accolade, Inc. (NASDAQ:ACCD), Onto Innovation Inc. (NYSE:ONTO), SPS Commerce, Inc. (NASDAQ:SPSC), Assured Guaranty Ltd. (NYSE:AGO), White Mountains Insurance Group Ltd (NYSE:WTM), PotlatchDeltic Corporation (NASDAQ:PCH), and PagerDuty, Inc. (NYSE:PD). This group of stocks' market values are similar to MUSA's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position ACCD,24,594899,5 ONTO,25,325217,7 SPSC,20,152872,0 AGO,11,195023,-11 WTM,17,232444,-2 PCH,28,112587,2 PD,26,656534,2 Average,21.6,324225,0.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 21.6 hedge funds with bullish positions and the average amount invested in these stocks was $324 million. That figure was $275 million in MUSA's case. PotlatchDeltic Corporation (NASDAQ:PCH) is the most popular stock in this table. On the other hand Assured Guaranty Ltd. (NYSE:AGO) is the least popular one with only 11 bullish hedge fund positions. Murphy USA Inc. (NYSE:MUSA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MUSA is 82. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on MUSA as the stock returned 24.6% since the end of Q2 (through 10/15) 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.