It’s been an up-and-down week for the markets. After not showing much fear between Tuesday and Thursday, the major indexes sold off hard on Friday, largely on the back of Boston Federal Reserve President Eric Rosengren’s comments that he essentially supported rate hikes sooner rather than later. Although the previously dovish Rosengren added that a gradual increase of rates is the most preferred path, traders suddenly became worried and went into ‘risk off’ mode. The sudden change in sentiment took many of the stocks that hit 52-week highs earlier in the week down on Friday.
Nevertheless, given that relative strength can sometimes be an indicator of good returns down the road, let’s put five stocks that recently hit 52-week highs under the microscope. They are Apache Corporation (NYSE:APA), Brady Corp (NYSE:BRC), Las Vegas Sands Corp. (NYSE:LVS), Swift Transportation Co (NYSE:SWFT), and Cabot Oil & Gas Corporation (NYSE:COG). In addition to examining their performance, we’ll also examine how hedge funds are positioned in each stock.
At Insider Monkey, we track around 750 hedge funds and institutional investors. Through extensive backtests, we have determined that imitating some of the stocks that these investors are collectively bullish on, can help retail investors generate double digits of alpha per year. The key is to focus on the small-cap picks of these funds, which are usually less followed by the broader market and allow for larger price inefficiencies (see the details here).
Apache Corporation (NYSE:APA) powered its way to a 52-week high on Friday, largely on the back of a major oil discovery in Texas. Sentiment around the stock has been so bullish that Apache shares held most of their gains even when WTI futures retreated by 4% on the last day of the trading week. Apache announced on Wednesday that it had made a major discovery in the Delaware Basin that could potentially hold up to 75 trillion cubic feet of rich gas and 3 billion barrels of oil in the Woodford and Barnett formations alone. Analysts estimate that the newly discovered resource, dubbed the Alpine High, could be worth $8 billion or more. Given that Apache’s market cap was under $20 billion before the discovery, it’s not surprising that traders bid the stock up. Natixis Global Asset Management‘s Harris Associates owned over 15 million shares in Apache Corporation (NYSE:APA) on June 30, down by 7% from the size of its holding on March 31.
Traders bid up Brady Corp (NYSE:BRC) to a 52-week high on Friday after the company reported better-than-expected fiscal fourth quarter earnings of $0.49 per share, while estimates had called for just $0.37 in EPS. Brady’s revenue of $282.11 million for the period was in-line with estimates. Although a certain one-time tax settlement helped boost EPS by $0.04, Brady’s profits were still robust, as the company’s gross margin, segment profit margin, and net earnings all improved on a year-over-year basis. For its fiscal year 2017, Brady anticipates EPS of $1.55-to-$1.70, compared to its fiscal year 2016 EPS of $1.58. The number of funds in our system with holdings in Brady Corp (NYSE:BRC) rose by one quarter-over-quarter to 16 at the end of June.
On the next page, we’ll examine why Las Vegas Sands, Swift Transportation, and Cabot Oil & Gas all pushed to yearly highs last week.