In this article we will take a look at whether hedge funds think Murphy Oil Corporation (NYSE:MUR) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Murphy Oil Corporation (NYSE:MUR) shareholders have witnessed a decrease in support from the world’s most elite money managers of late. Our calculations also showed that MUR 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).
Video: Watch our video about the top 5 most popular hedge fund stocks.
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 58 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 underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in stocks that are in our short portfolio.
Philippe Laffont of Coatue Management
We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We take a look at lists like the 10 most profitable companies in the world to identify the compounders that are likely to deliver double digit returns. 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. Keeping this in mind let’s take a glance at the key hedge fund action regarding Murphy Oil Corporation (NYSE:MUR).
What does smart money think about Murphy Oil Corporation (NYSE:MUR)?
At Q1’s end, a total of 20 of the hedge funds tracked by Insider Monkey were long this stock, a change of -17% from the fourth quarter of 2019. On the other hand, there were a total of 20 hedge funds with a bullish position in MUR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were boosting their holdings substantially (or already accumulated large positions).
Of the funds tracked by Insider Monkey, Richard S. Pzena’s Pzena Investment Management has the biggest position in Murphy Oil Corporation (NYSE:MUR), worth close to $21.2 million, accounting for 0.2% of its total 13F portfolio. Coming in second is Citadel Investment Group, led by Ken Griffin, holding a $6.4 million position; the fund has less than 0.1%% of its 13F portfolio invested in the stock. Remaining peers that hold long positions consist of Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital, John Overdeck and David Siegel’s Two Sigma Advisors and Renaissance Technologies. In terms of the portfolio weights assigned to each position Pzena Investment Management allocated the biggest weight to Murphy Oil Corporation (NYSE:MUR), around 0.16% of its 13F portfolio. Winton Capital Management is also relatively very bullish on the stock, dishing out 0.05 percent of its 13F equity portfolio to MUR.
Due to the fact that Murphy Oil Corporation (NYSE:MUR) has witnessed falling interest from the entirety of the hedge funds we track, it’s safe to say that there lies a certain “tier” of hedge funds that slashed their positions entirely heading into Q4. At the top of the heap, Till Bechtolsheimer’s Arosa Capital Management dumped the largest position of the 750 funds followed by Insider Monkey, comprising about $8.4 million in stock. Paul Marshall and Ian Wace’s fund, Marshall Wace LLP, also dropped its stock, about $1.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest fell by 4 funds heading into Q4.
Let’s now review hedge fund activity in other stocks similar to Murphy Oil Corporation (NYSE:MUR). These stocks are Aimmune Therapeutics Inc (NASDAQ:AIMT), NuStar Energy L.P. (NYSE:NS), ATN International, Inc. (NASDAQ:ATNI), and SecureWorks Corp. (NASDAQ:SCWX). This group of stocks’ market valuations are similar to MUR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AIMT | 18 | 138411 | 5 |
| NS | 4 | 8087 | -3 |
| ATNI | 8 | 59085 | -1 |
| SCWX | 11 | 11882 | -3 |
| Average | 10.25 | 54366 | -0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 10.25 hedge funds with bullish positions and the average amount invested in these stocks was $54 million. That figure was $46 million in MUR’s case. Aimmune Therapeutics Inc (NASDAQ:AIMT) is the most popular stock in this table. On the other hand NuStar Energy L.P. (NYSE:NS) is the least popular one with only 4 bullish hedge fund positions. Compared to these stocks Murphy Oil Corporation (NYSE:MUR) is more popular among hedge funds. 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 returned 12.2% in 2020 through June 17th but still managed to beat the market by 14.8 percentage points. Hedge funds were also right about betting on MUR as the stock returned 140.8% so far in Q2 (through June 17th) 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.
