Did The Smart Money Get APA Corporation (APA) Right?

Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards APA Corporation (NASDAQ:APA) at the end of the third quarter and determine whether the smart money was really smart about this stock.

Is APA Corporation (NASDAQ:APA) a buy, sell, or hold? Hedge funds were getting less bullish. The number of long hedge fund positions went down by 4 lately. APA Corporation (NASDAQ:APA) was in 33 hedge funds’ portfolios at the end of September. The all time high for this statistic is 45. Our calculations also showed that APA isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings). There were 37 hedge funds in our database with APA positions at the end of the second quarter.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so we go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. Keeping this in mind let’s review the key hedge fund action encompassing APA Corporation (NASDAQ:APA).

Do Hedge Funds Think APA Is A Good Stock To Buy Now?

Heading into the fourth quarter of 2021, a total of 33 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the second quarter of 2021. Below, you can check out the change in hedge fund sentiment towards APA over the last 25 quarters. So, let’s check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, D E Shaw held the most valuable stake in APA Corporation (NASDAQ:APA), which was worth $172.6 million at the end of the third quarter. On the second spot was Paulson & Co which amassed $64.3 million worth of shares. Elliott Investment Management, Citadel Investment Group, and Laurion Capital Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Paulson & Co allocated the biggest weight to APA Corporation (NASDAQ:APA), around 1.83% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, designating 1.4 percent of its 13F equity portfolio to APA.

Judging by the fact that APA Corporation (NASDAQ:APA) has witnessed declining sentiment from hedge fund managers, logic holds that there were a few funds who sold off their positions entirely in the third quarter. At the top of the heap, Dmitry Balyasny’s Balyasny Asset Management dropped the largest investment of the “upper crust” of funds monitored by Insider Monkey, totaling an estimated $25.1 million in call options, and Michael Gelband’s ExodusPoint Capital was right behind this move, as the fund dropped about $5.4 million worth. These moves are important to note, as total hedge fund interest dropped by 4 funds in the third quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as APA Corporation (NASDAQ:APA) but similarly valued. We will take a look at Penske Automotive Group, Inc. (NYSE:PAG), Nutanix, Inc. (NASDAQ:NTNX), Tetra Tech, Inc. (NASDAQ:TTEK), Arrow Electronics, Inc. (NYSE:ARW), Universal Display Corporation (NASDAQ:OLED), Scientific Games Corp (NASDAQ:SGMS), and Jazz Pharmaceuticals Plc (NASDAQ:JAZZ). This group of stocks’ market values are similar to APA’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 22.9 hedge funds with bullish positions and the average amount invested in these stocks was $748 million. That figure was $459 million in APA’s case. Jazz Pharmaceuticals Plc (NASDAQ:JAZZ) is the most popular stock in this table. On the other hand Tetra Tech, Inc. (NASDAQ:TTEK) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks APA Corporation (NASDAQ:APA) is more popular among hedge funds. Our overall hedge fund sentiment score for APA is 73. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks returned 29.6% in 2021 and managed to beat the market by another 3.6 percentage points. Hedge funds were also right about betting on APA as the stock returned 55.9% since the end of September (through 1/31) 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.