Did Hedge Funds Make The Right Call On ChampionX Corporation (APY) ?

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). 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 ChampionX Corporation (NYSE:APY) at the end of the first quarter and determine whether the smart money was really smart about this stock.

Is ChampionX Corporation (NYSE:APY) going to take off soon? The best stock pickers were in a bullish mood. The number of bullish hedge fund positions inched up by 2 recently. Our calculations also showed that APY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

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

According to most market participants, hedge funds are viewed as worthless, outdated investment vehicles of the past. While there are greater than 8000 funds trading at present, Our experts hone in on the crème de la crème of this group, about 850 funds. Most estimates calculate that this group of people manage the lion’s share of the hedge fund industry’s total asset base, and by keeping an eye on their highest performing investments, Insider Monkey has unearthed various investment strategies that have historically outpaced the market. Insider Monkey’s flagship short hedge fund strategy outperformed the S&P 500 short ETFs by around 20 percentage points per year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

John Overdeck of Two Sigma

John Overdeck of Two Sigma Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind let’s take a glance at the latest hedge fund action surrounding ChampionX Corporation (NYSE:APY).

How have hedgies been trading ChampionX Corporation (NYSE:APY)?

Heading into the second quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 12% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards APY over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).

The largest stake in ChampionX Corporation (NYSE:APY) was held by East Side Capital (RR Partners), which reported holding $10.5 million worth of stock at the end of September. It was followed by Citadel Investment Group with a $8.3 million position. Other investors bullish on the company included Renaissance Technologies, Balyasny Asset Management, and AQR Capital Management. In terms of the portfolio weights assigned to each position East Side Capital (RR Partners) allocated the biggest weight to ChampionX Corporation (NYSE:APY), around 2.08% of its 13F portfolio. Fondren Management is also relatively very bullish on the stock, designating 0.29 percent of its 13F equity portfolio to APY.

Now, some big names have been driving this bullishness. Renaissance Technologies, created the biggest position in ChampionX Corporation (NYSE:APY). Renaissance Technologies had $5.8 million invested in the company at the end of the quarter. John Overdeck and David Siegel’s Two Sigma Advisors also initiated a $0.9 million position during the quarter. The other funds with new positions in the stock are Michael Gelband’s ExodusPoint Capital, Paul Marshall and Ian Wace’s Marshall Wace LLP, and Benjamin A. Smith’s Laurion Capital Management.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as ChampionX Corporation (NYSE:APY) but similarly valued. We will take a look at Guess’, Inc. (NYSE:GES), Summit Hotel Properties Inc (NYSE:INN), Ranpak Holdings Corp (NYSE:PACK), and Foundation Building Materials, Inc. (NYSE:FBM). This group of stocks’ market values are closest to APY’s market value.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
GES 16 31475 -4
INN 12 8543 -3
PACK 14 253601 -3
FBM 12 44726 -9
Average 13.5 84586 -4.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.5 hedge funds with bullish positions and the average amount invested in these stocks was $85 million. That figure was $49 million in APY’s case. Guess’, Inc. (NYSE:GES) is the most popular stock in this table. On the other hand Summit Hotel Properties Inc (NYSE:INN) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks ChampionX Corporation (NYSE:APY) is more popular among hedge funds. 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 returned 18.6% in 2020 through July 27th but still managed to beat the market by 17.1 percentage points. Hedge funds were also right about betting on APY as the stock returned 69.4% since Q1 and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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