Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Marathon Petroleum Corp (NYSE:MPC) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Is Marathon Petroleum Corp (NYSE:MPC) going to take off soon? The smart money was taking a bearish view. The number of long hedge fund positions fell by 5 lately. Marathon Petroleum Corp (NYSE:MPC) was in 43 hedge funds’ portfolios at the end of the third quarter of 2021. The all time high for this statistic is 72. Our calculations also showed that MPC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind let’s go over the key hedge fund action encompassing Marathon Petroleum Corp (NYSE:MPC).
Paul Singer of Elliott Management
Do Hedge Funds Think MPC Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2021, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from one quarter earlier. By comparison, 56 hedge funds held shares or bullish call options in MPC 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 significantly (or already accumulated large positions).
The largest stake in Marathon Petroleum Corp (NYSE:MPC) was held by Elliott Investment Management, which reported holding $653.3 million worth of stock at the end of September. It was followed by D E Shaw with a $631.2 million position. Other investors bullish on the company included Laurion Capital Management, Elliott Investment Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Elliott Investment Management allocated the biggest weight to Marathon Petroleum Corp (NYSE:MPC), around 4.69% of its 13F portfolio. SIR Capital Management is also relatively very bullish on the stock, setting aside 3.43 percent of its 13F equity portfolio to MPC.
Seeing as Marathon Petroleum Corp (NYSE:MPC) has faced a decline in interest from the smart money, we can see that there lies a certain “tier” of hedgies that slashed their entire stakes heading into Q4. Interestingly, Steve Cohen’s Point72 Asset Management cut the largest stake of the 750 funds monitored by Insider Monkey, valued at close to $19 million in stock. Dmitry Balyasny’s fund, Balyasny Asset Management, also said goodbye to its stock, about $11.2 million worth. These moves are important to note, as aggregate hedge fund interest dropped by 5 funds heading into Q4.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Marathon Petroleum Corp (NYSE:MPC) but similarly valued. These stocks are Alcon Inc. (NYSE:ALC), Motorola Solutions Inc (NYSE:MSI), Cognizant Technology Solutions Corp (NASDAQ:CTSH), Ross Stores, Inc. (NASDAQ:ROST), ResMed Inc. (NYSE:RMD), Republic Services, Inc. (NYSE:RSG), and SVB Financial Group (NASDAQ:SIVB). This group of stocks’ market valuations are closest to MPC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ALC | 20 | 1263277 | -2 |
| MSI | 34 | 1266185 | -3 |
| CTSH | 29 | 2336693 | -12 |
| ROST | 41 | 1220437 | -10 |
| RMD | 28 | 396289 | 2 |
| RSG | 31 | 1222055 | -3 |
| SIVB | 45 | 1207137 | -4 |
| Average | 32.6 | 1273153 | -4.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.6 hedge funds with bullish positions and the average amount invested in these stocks was $1273 million. That figure was $2689 million in MPC’s case. SVB Financial Group (NASDAQ:SIVB) is the most popular stock in this table. On the other hand Alcon Inc. (NYSE:ALC) is the least popular one with only 20 bullish hedge fund positions. Marathon Petroleum Corp (NYSE:MPC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for MPC is 63.9. 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. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Hedge funds were also right about betting on MPC as the stock returned 17.1% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Marathon Petroleum Corp (NYSE:MPC)
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Disclosure: None. This article was originally published at Insider Monkey.
