Murphy USA Inc

Murphy USA operates a convenience store and fuel retail network built around an everyday low-price strategy, supported by an advantaged fuel procurement model and low-cost operating structure. We initiated a GardenSM position following a management change and later elevated it to a CropSM position as our work increased conviction that the company’s everyday low-price fuel and nicotine strategy would matter again. In our view, Murphy is entering a favorable profit cycle, supported by structurally improving fuel margins, continued market share gains, ongoing new store growth and operational improvements under the new management team.

During the quarter, we added a new holding in Murphy USA (MUSA), a large-scale, low-cost operator of gas stations and convenience stores throughout the country. The return of higher gas prices allowed MUSA to flex its low-cost advantage, offering everyday discounted prices to consumers seeking value. We believe Murphy has done just that, and management seems to know it, as they have been buying back shares along the way. The company’s structural share gains and attractive valuation gave us confidence to purchase shares despite no certainty that fuel margins would improve.

Murphy’s (MUSA) is well-positioned in the current oil price environment, benefiting from its strategic locations near Walmart parking lots, which ensures a steady customer base. The company provides discount gas, giving it a significant price advantage as gas prices rise. This essential service enhances its appeal to consumers, particularly during periods of economic uncertainty. We have owned shares in Murphy’s since 2022, reflecting our confidence in its ability to deliver consistent value to customers and maintain profitability.

Despite being a bottom performer due to softer market share gains in Q1, our long-term thesis on Murphy USA, Inc. remains intact. We believe in the company's structurally higher industry fuel margins and its strategy of everyday low pricing, which drives profitable market share gains. Additionally, we are confident in their value-creating capital allocation, which positions them well for future growth.

Despite being a bottom performer due to softer market share gains in Q1, our long-term thesis on Murphy USA, Inc. remains intact. We believe in the company's structurally higher industry fuel margins and its strategy of everyday low pricing, which drives profitable market share gains. Additionally, we are confident in their value-creating capital allocation, which positions them well for future growth.

Despite being a bottom performer due to softer market share gains in Q1, the long-term components of our thesis for Murphy USA, Inc. remain intact. We believe in structurally higher industry fuel margins, the everyday low price strategy driving profitable market share gains, and value-creating capital allocation. These factors position Murphy USA well for future growth, even amidst current challenges.