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Apache Corporation (APA): Hedge Fund Interest Inching Up

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (see why hell is coming). We reversed our stance on March 25th after seeing unprecedented fiscal and monetary stimulus unleashed by the Fed and the Congress. This is the perfect market for stock pickers, now that the stocks are fully valued again. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Apache Corporation (NASDAQ:APA) at the end of the second quarter and determine whether the smart money was really smart about this stock.

Is Apache Corporation (NASDAQ:APA) the right investment to pursue these days? The best stock pickers were betting on the stock. The number of long hedge fund bets advanced by 5 lately. Apache Corporation (NASDAQ:APA) was in 40 hedge funds’ portfolios at the end of June. The all time high for this statistics is 45. Our calculations also showed that APA isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 35 hedge funds in our database with APA positions at the end of the first quarter.

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 101% since March 2017 and outperformed the S&P 500 ETFs by more than 56 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost precious metals prices. So, we are checking out this junior gold mining stock. Legal marijuana is one of the fastest growing industries right now, so we are checking out stock pitches like “the Starbucks of cannabis” to identify the next tenbagger. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Now we’re going to review the latest hedge fund action regarding Apache Corporation (NASDAQ:APA).

Hedge fund activity in Apache Corporation (NASDAQ:APA)

Heading into the third quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. On the other hand, there were a total of 22 hedge funds with a bullish position in APA a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

According to Insider Monkey’s hedge fund database, William B. Gray’s Orbis Investment Management has the largest position in Apache Corporation (NASDAQ:APA), worth close to $211 million, comprising 1.6% of its total 13F portfolio. On Orbis Investment Management’s heels is Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, which holds a $90.2 million position; the fund has 0.2% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that are bullish comprise Ken Griffin’s Citadel Investment Group, Israel Englander’s Millennium Management and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position SIR Capital Management allocated the biggest weight to Apache Corporation (NASDAQ:APA), around 4.49% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, dishing out 3.12 percent of its 13F equity portfolio to APA.

As aggregate interest increased, specific money managers were leading the bulls’ herd. Alyeska Investment Group, managed by Anand Parekh, created the biggest position in Apache Corporation (NASDAQ:APA). Alyeska Investment Group had $22.7 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan’s SIR Capital Management also made a $18.3 million investment in the stock during the quarter. The following funds were also among the new APA investors: Clint Carlson’s Carlson Capital, Andy Redleaf’s Whitebox Advisors, and Ben Levine, Andrew Manuel and Stefan Renold’s LMR Partners.

Let’s now review hedge fund activity in other stocks similar to Apache Corporation (NASDAQ:APA). These stocks are Hyatt Hotels Corporation (NYSE:H), Rexford Industrial Realty Inc (NYSE:REXR), ITT Inc. (NYSE:ITT), Brunswick Corporation (NYSE:BC), National Instruments Corporation (NASDAQ:NATI), CDK Global Inc (NASDAQ:CDK), and Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC). This group of stocks’ market caps are similar to APA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
H 27 468490 3
REXR 24 179158 9
ITT 25 512144 -3
BC 35 1425715 12
NATI 35 259007 6
CDK 32 323704 8
TKC 5 48945 2
Average 26.1 459595 5.3

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $591 million in APA’s case. Brunswick Corporation (NYSE:BC) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Apache Corporation (NASDAQ:APA) is more popular among hedge funds. Our overall hedge fund sentiment score for APA is 86.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 gained 33% in 2020 through the end of August and still beat the market by 23.2 percentage points. Unfortunately APA wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on APA were disappointed as the stock returned 9.8% since the end of the second 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 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.