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Is Apache Corporation (APA) A Good Stock To Buy?

We at Insider Monkey have gone over 738 13F filings that hedge funds and famous value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st. In this article we look at what those investors think of Apache Corporation (NYSE:APA).

Apache Corporation (NYSE:APA) shareholders have witnessed a decrease in hedge fund interest lately. APA was in 28 hedge funds’ portfolios at the end of the first quarter of 2019. There were 29 hedge funds in our database with APA holdings at the end of the previous quarter. Our calculations also showed that apa isn’t among the 30 most popular stocks among hedge funds.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? 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 40 percentage points since May 2014 through May 30, 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. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

John Overdeck of Two Sigma

We’re going to review the latest hedge fund action encompassing Apache Corporation (NYSE:APA).

What does the smart money think about Apache Corporation (NYSE:APA)?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the fourth quarter of 2018. Below, you can check out the change in hedge fund sentiment towards APA over the last 15 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.

No of Hedge Funds with APA Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Orbis Investment Management, managed by William B. Gray, holds the largest position in Apache Corporation (NYSE:APA). Orbis Investment Management has a $502.3 million position in the stock, comprising 3.4% of its 13F portfolio. On Orbis Investment Management’s heels is Two Sigma Advisors, managed by John Overdeck and David Siegel, which holds a $37.8 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Remaining members of the smart money that hold long positions consist of Ken Griffin’s Citadel Investment Group, D. E. Shaw’s D E Shaw and Brandon Haley’s Holocene Advisors.

Judging by the fact that Apache Corporation (NYSE:APA) has faced declining sentiment from hedge fund managers, we can see that there were a few money managers that slashed their entire stakes by the end of the third quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management cut the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $26.8 million in stock. Matthew Tewksbury’s fund, Stevens Capital Management, also said goodbye to its stock, about $4.8 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest dropped by 1 funds by the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to Apache Corporation (NYSE:APA). We will take a look at Arch Capital Group Ltd. (NASDAQ:ACGL), W.P. Carey Inc. (NYSE:WPC), Extra Space Storage, Inc. (NYSE:EXR), and Teck Resources Ltd (NYSE:TECK). This group of stocks’ market caps resemble APA’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACGL 12 1100250 -1
WPC 13 55062 3
EXR 17 162191 -7
TECK 27 1078134 1
Average 17.25 598909 -1

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 $599 million. That figure was $616 million in APA’s case. Teck Resources Ltd (NYSE:TECK) is the most popular stock in this table. On the other hand Arch Capital Group Ltd. (NASDAQ:ACGL) is the least popular one with only 12 bullish hedge fund positions. Compared to these stocks Apache Corporation (NYSE:APA) is more popular among hedge funds. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately APA wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on APA were disappointed as the stock returned -24% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market in Q2.

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

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