Did Hedge Funds Drop The Ball On Apergy Corporation (APY) ?

During the fourth quarter the Russell 2000 ETF (IWM) lagged the larger S&P 500 ETF (SPY) by nearly 7 percentage points as investors worried over the possible ramifications of rising interest rates. The hedge funds and institutional investors we track typically invest more in smaller-cap stocks than an average investor (i.e. only 298 S&P 500 constituents were among the 500 most popular stocks among hedge funds), and we have seen data that shows those funds paring back their overall exposure. Those funds cutting positions in small-caps is one reason why volatility has increased. In the following paragraphs, we take a closer look at what hedge funds and prominent investors think of Apergy Corporation (NYSE:APY) and see how the stock is affected by the recent hedge fund activity.

Apergy Corporation (NYSE:APY) has seen a decrease in hedge fund interest recently. APY was in 13 hedge funds’ portfolios at the end of December. There were 20 hedge funds in our database with APY positions at the end of the previous quarter. Our calculations also showed that apy isn’t among the 30 most popular stocks among hedge funds.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.


Let’s take a gander at the fresh hedge fund action regarding Apergy Corporation (NYSE:APY).

How are hedge funds trading Apergy Corporation (NYSE:APY)?

At Q4’s end, a total of 13 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -35% from the previous quarter. On the other hand, there were a total of 0 hedge funds with a bullish position in APY a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with APY Positions

The largest stake in Apergy Corporation (NYSE:APY) was held by East Side Capital (RR Partners), which reported holding $58.4 million worth of stock at the end of December. It was followed by Encompass Capital Advisors with a $17 million position. Other investors bullish on the company included Citadel Investment Group, Millennium Management, and Holocene Advisors.

Seeing as Apergy Corporation (NYSE:APY) has faced falling interest from hedge fund managers, it’s safe to say that there was a specific group of hedge funds that elected to cut their positions entirely in the third quarter. Intriguingly, Benjamin A. Smith’s Laurion Capital Management dumped the biggest stake of the “upper crust” of funds followed by Insider Monkey, totaling close to $14.9 million in stock. Amy Minella’s fund, Cardinal Capital, also cut its stock, about $14 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest dropped by 7 funds in the third quarter.

Let’s check out hedge fund activity in other stocks – not necessarily in the same industry as Apergy Corporation (NYSE:APY) but similarly valued. These stocks are Vonage Holdings Corp. (NYSE:VG), Applied Industrial Technologies, Inc. (NYSE:AIT), Evertec Inc (NYSE:EVTC), and Sogou Inc. (NYSE:SOGO). This group of stocks’ market caps are closest to APY’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
VG 22 154896 -4
AIT 20 101502 -4
EVTC 21 224095 1
SOGO 6 9668 0
Average 17.25 122540 -1.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 17.25 hedge funds with bullish positions and the average amount invested in these stocks was $123 million. That figure was $116 million in APY’s case. Vonage Holdings Corp. (NYSE:VG) is the most popular stock in this table. On the other hand Sogou Inc. (NYSE:SOGO) is the least popular one with only 6 bullish hedge fund positions. Apergy Corporation (NYSE:APY) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 15 most popular stocks) among hedge funds returned 24.2% through April 22nd and outperformed the S&P 500 ETF (SPY) by more than 7 percentage points. A small number of hedge funds were also right about betting on APY as the stock returned 58.2% and outperformed the market by an even larger margin.

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