Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips on the charts, usually don’t make them change their opinion towards a company. This time it may be different. During the fourth quarter of 2018 we observed increased volatility and small-cap stocks underperformed the market. Hedge fund investor letters indicated that they are cutting their overall exposure, closing out some position and doubling down on others. Let’s take a look at the hedge fund sentiment towards Marathon Oil Corporation (NYSE:MRO) to find out whether it was one of their high conviction long-term ideas.
Is Marathon Oil Corporation (NYSE:MRO) an exceptional investment right now? The best stock pickers are in a bearish mood. The number of bullish hedge fund bets decreased by 2 in recent months. Our calculations also showed that MRO isn’t among the 30 most popular stocks among hedge funds. MRO was in 37 hedge funds’ portfolios at the end of December. There were 39 hedge funds in our database with MRO holdings at the end of the previous quarter.
In the 21st century investor’s toolkit there are a lot of formulas investors have at their disposal to assess stocks. A pair of the best formulas are hedge fund and insider trading activity. We have shown that, historically, those who follow the top picks of the elite investment managers can outpace the broader indices by a very impressive margin (see the details here).
Let’s take a peek at the fresh hedge fund action encompassing Marathon Oil Corporation (NYSE:MRO).
What does the smart money think about Marathon Oil Corporation (NYSE:MRO)?
At the end of the fourth quarter, a total of 37 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from one quarter earlier. On the other hand, there were a total of 33 hedge funds with a bullish position in MRO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Millennium Management was the largest shareholder of Marathon Oil Corporation (NYSE:MRO), with a stake worth $169 million reported as of the end of September. Trailing Millennium Management was Citadel Investment Group, which amassed a stake valued at $141.9 million. Point72 Asset Management, AQR Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
Seeing as Marathon Oil Corporation (NYSE:MRO) has experienced declining sentiment from the smart money, it’s safe to say that there exists a select few hedgies that decided to sell off their entire stakes in the third quarter. Interestingly, Doug Silverman and Alexander Klabin’s Senator Investment Group dumped the largest stake of the 700 funds followed by Insider Monkey, worth an estimated $46.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell’s fund, Arrowstreet Capital, also cut its stock, about $20 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 2 funds in the third quarter.
Let’s go over hedge fund activity in other stocks similar to Marathon Oil Corporation (NYSE:MRO). These stocks are Skyworks Solutions Inc (NASDAQ:SWKS), Match Group, Inc. (NASDAQ:MTCH), Hologic, Inc. (NASDAQ:HOLX), and Teleflex Incorporated (NYSE:TFX). This group of stocks’ market caps resemble MRO’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| SWKS | 32 | 666763 | 7 |
| MTCH | 24 | 295721 | -5 |
| HOLX | 28 | 803211 | 6 |
| TFX | 15 | 596575 | -2 |
| Average | 24.75 | 590568 | 1.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 24.75 hedge funds with bullish positions and the average amount invested in these stocks was $591 million. That figure was $746 million in MRO’s case. Skyworks Solutions Inc (NASDAQ:SWKS) is the most popular stock in this table. On the other hand Teleflex Incorporated (NYSE:TFX) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Marathon Oil Corporation (NYSE:MRO) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. A handful of hedge funds were also right about betting on MRO as the stock returned 20.7% and outperformed the market as well. You can see the entire list of these shrewd hedge funds here.
Disclosure: None. This article was originally published at Insider Monkey.
