Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before the Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the fourth quarter, many investors lost money due to unpredictable events such as the sudden increase in long-term interest rates and unintended consequences of the trade war with China. Nevertheless, many of the stocks that tanked in the fourth quarter still sport strong fundamentals and their decline was more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Apogee Enterprises, Inc. (NASDAQ:APOG) changed recently.
Apogee Enterprises, Inc. (NASDAQ:APOG) investors should pay attention to a decrease in hedge fund sentiment recently. Our calculations also showed that apog 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 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. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
[caption id="attachment_745225" align="aligncenter" width="473"] Noam Gottesman, GLG Partners[/caption]
Let's take a gander at the latest hedge fund action encompassing Apogee Enterprises, Inc. (NASDAQ:APOG).
What does the smart money think about Apogee Enterprises, Inc. (NASDAQ:APOG)?
At Q4's end, a total of 16 of the hedge funds tracked by Insider Monkey were long this stock, a change of -6% from the second quarter of 2018. The graph below displays the number of hedge funds with bullish position in APOG over the last 14 quarters. With hedgies' positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
More specifically, Engaged Capital was the largest shareholder of Apogee Enterprises, Inc. (NASDAQ:APOG), with a stake worth $50.4 million reported as of the end of September. Trailing Engaged Capital was Royce & Associates, which amassed a stake valued at $36.1 million. Headlands Capital, Skylands Capital, and Citadel Investment Group were also very fond of the stock, giving the stock large weights in their portfolios.
Due to the fact that Apogee Enterprises, Inc. (NASDAQ:APOG) has witnessed declining sentiment from hedge fund managers, it's safe to say that there were a few funds who were dropping their entire stakes heading into Q3. At the top of the heap, Ken Fisher's Fisher Asset Management said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising about $5.4 million in stock, and Noam Gottesman's GLG Partners was right behind this move, as the fund cut about $1.6 million worth. These transactions are intriguing to say the least, as total hedge fund interest fell by 1 funds heading into Q3.
Let's now review hedge fund activity in other stocks similar to Apogee Enterprises, Inc. (NASDAQ:APOG). These stocks are Tactile Systems Technology, Inc. (NASDAQ:TCMD), Canadian Solar Inc. (NASDAQ:CSIQ), State Bank Financial Corp (NASDAQ:STBZ), and Geopark Ltd (NYSE:GPRK). This group of stocks' market caps are closest to APOG's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position TCMD,14,39982,4 CSIQ,11,96306,-4 STBZ,17,120356,-4 GPRK,13,66659,3 Average,13.75,80826,-0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $81 million. That figure was $116 million in APOG's case. State Bank Financial Corp (NASDAQ:STBZ) is the most popular stock in this table. On the other hand Canadian Solar Inc. (NASDAQ:CSIQ) is the least popular one with only 11 bullish hedge fund positions. Apogee Enterprises, Inc. (NASDAQ:APOG) is not the most popular stock in this group but hedge fund interest is still above 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. Hedge funds were also right about betting on APOG as the stock returned 31.8% and outperformed the market by an even larger margin. Hedge funds were rewarded for their relative bullishness.
Disclosure: None. This article was originally published at Insider Monkey.