Hedge fund managers like David Einhorn, Bill Ackman, or Carl Icahn became billionaires through reaping large profits for their investors, which is why piggybacking their stock picks may provide us with significant returns as well. Many hedge funds, like Paul Singer’s Elliott Management, are pretty secretive, but we can still get some insights by analyzing their quarterly 13F filings. One of the most fertile grounds for large abnormal returns is hedge funds’ most popular small-cap picks, which are not so widely followed and often trade at a discount to their intrinsic value. In this article we will check out hedge fund activity in another small-cap stock: Murphy Oil Corporation (NYSE:MUR).
Murphy Oil Corporation (NYSE:MUR) has seen a decrease in enthusiasm from smart money recently. Our calculations also showed that MUR isn’t among the 30 most popular stocks among hedge funds (view the video below).
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 25.7% through September 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Unlike former hedge manager, Dr. Steve Sjuggerud, who is convinced Dow will soar past 40000, our long-short investment strategy doesn’t rely on bull markets to deliver double digit returns. We only rely on hedge fund buy/sell signals. We’re going to take a look at the recent hedge fund action regarding Murphy Oil Corporation (NYSE:MUR).
How are hedge funds trading Murphy Oil Corporation (NYSE:MUR)?
At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the first quarter of 2019. On the other hand, there were a total of 23 hedge funds with a bullish position in MUR a year ago. With hedgies’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were increasing their holdings meaningfully (or already accumulated large positions).
The largest stake in Murphy Oil Corporation (NYSE:MUR) was held by Pzena Investment Management, which reported holding $38.6 million worth of stock at the end of March. It was followed by D E Shaw with a $18.7 million position. Other investors bullish on the company included Two Sigma Advisors, SIR Capital Management, and AQR Capital Management.
Seeing as Murphy Oil Corporation (NYSE:MUR) has experienced a decline in interest from hedge fund managers, logic holds that there is a sect of hedge funds that elected to cut their positions entirely last quarter. Interestingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the largest stake of all the hedgies monitored by Insider Monkey, worth about $40.2 million in stock. Anand Parekh’s fund, Alyeska Investment Group, also sold off its stock, about $21.6 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 2 funds last quarter.
Let’s now review hedge fund activity in other stocks similar to Murphy Oil Corporation (NYSE:MUR). We will take a look at RBC Bearings Incorporated (NASDAQ:ROLL), Graphic Packaging Holding Company (NYSE:GPK), Stifel Financial Corp. (NYSE:SF), and Viper Energy Partners LP (NASDAQ:VNOM). This group of stocks’ market valuations are closest to MUR’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ROLL | 6 | 59579 | -5 |
| GPK | 30 | 534112 | 6 |
| SF | 15 | 160961 | -1 |
| VNOM | 13 | 160127 | -4 |
| Average | 16 | 228695 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 16 hedge funds with bullish positions and the average amount invested in these stocks was $229 million. That figure was $122 million in MUR’s case. Graphic Packaging Holding Company (NYSE:GPK) is the most popular stock in this table. On the other hand RBC Bearings Incorporated (NASDAQ:ROLL) is the least popular one with only 6 bullish hedge fund positions. Murphy Oil Corporation (NYSE:MUR) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 24.4% in 2019 through September 30th and outperformed the S&P 500 ETF (SPY) by 4 percentage points. Unfortunately MUR wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on MUR were disappointed as the stock returned -9.1% during the third quarter and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Disclosure: None. This article was originally published at Insider Monkey.
