Should You Increase Your Holdings in Murphy USA (MUSA)?

“We currently hold an approximately 3.5% position in Murphy USA Inc. (NYSE:MUSA), and wanted to tell you more about this portfolio holding. This section was written by our intern Tin Nguyen, who is a junior at the University of Texas at Austin, with light edits by me.

Murphy USA (MUSA) is a fuel marketer, operating both gas stations and wholesale fuel distribution. The company also has a merchandise business segment where they sell typical convenience store items such as tobacco, energy drinks, and snacks. However, unlike many convenience stores, or CStores, the bulk of their gross profit comes from their retail fuel segment. In FY 2021, Murphy USA’s fuel contribution made up 62% of their gross profit while only 38% came from their merchandise contribution1 . By comparison, competitors such as CASY and Couche-Tard (Circle K) (pictured on the right) derive roughly 65% and 51% of their gross profit from convenience store sales and only 35 % and 47% from fuel, respectively.

Murphy USA became public in 2013 after Murphy Oil spun off its downstream energy business. The company primarily operates a kiosk model, or a C-store with low square footage dedicated to the store, many times only having 400 square feet of store area. By comparison, a typical Casy Store is 2,450 sq ft. for their larger store designs and 1,350 sq ft. for the rest of their smaller store designs4 . Historically, Murphy USA has had a partnership with Walmart where the majority of their Murphy USA branded stores are located in Walmart parking lots, with Murphy USA owning the underlying real estate. The company operates primarily in the Southeast, Southwest, and Midwest of the United States, and is one of the largest C-store chains by store count in the US…” (Click here to read the full text)