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These Hedge Funds Regret Piling Into Apache Corporation (APA)

Reymerlyn Martin
·6 min read

In this article you are going to find out whether hedge funds think Apache Corporation (NASDAQ:APA) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Apache Corporation (NASDAQ:APA) going to take off soon? Prominent investors were in a bullish mood. The number of long hedge fund positions advanced by 5 recently. Apache Corporation (NASDAQ:APA) was in 40 hedge funds' portfolios at the end of the second quarter of 2020. The all time high for this statistics is 45. Our calculations also showed that APA isn't among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 35 hedge funds in our database with APA positions at the end of the first quarter. Video: Watch our video about the top 5 most popular hedge fund stocks.

To most stock holders, hedge funds are assumed to be worthless, old financial tools of yesteryear. While there are more than 8000 funds with their doors open at the moment, Our experts choose to focus on the moguls of this club, around 850 funds. It is estimated that this group of investors control the lion's share of the smart money's total asset base, and by following their unrivaled investments, Insider Monkey has identified various investment strategies that have historically beaten the broader indices. Insider Monkey's flagship short hedge fund strategy beat 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 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Andy Redleaf Andrew Redleaf Whitebox Advisors
Andy Redleaf Andrew Redleaf Whitebox Advisors

Andy Redleaf of Whitebox Advisors

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Our analysis determined that presidential election polls were wrong heading into the 2020 election and we were able to make the most accurate predictions in the country after making adjustments for the biases in existing polls. For example we predicted comfortable Trump victories in Florida, North Carolina, Texas, Iowa, and Ohio. We also predicted a very narrow Biden victory of 0.4 points in Wisconsin when most pollsters were predicting 8 to 10 points Biden victories. We are waiting for the results of 5 more states, but our accuracy rate so far is 100% (see our predictions). You can subscribe to our free daily newsletter on our website to get email alerts whenever we publish an interesting article. Keeping this in mind let's take a gander at the fresh hedge fund action surrounding Apache Corporation (NASDAQ:APA).

How have hedgies been trading Apache Corporation (NASDAQ:APA)?

Heading into the third quarter of 2020, a total of 40 of the hedge funds tracked by Insider Monkey were long this stock, a change of 14% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards APA over the last 20 quarters. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

More specifically, Orbis Investment Management was the largest shareholder of Apache Corporation (NASDAQ:APA), with a stake worth $211 million reported as of the end of June. Trailing Orbis Investment Management was Arrowstreet Capital, which amassed a stake valued at $90.2 million. Citadel Investment Group, Millennium Management, and Point72 Asset 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 SIR Capital Management allocated the biggest weight to Apache Corporation (NASDAQ:APA), around 4.49% of its 13F portfolio. Kettle Hill Capital Management is also relatively very bullish on the stock, setting aside 3.12 percent of its 13F equity portfolio to APA.

As industrywide interest jumped, key hedge funds were leading the bulls' herd. Alyeska Investment Group, managed by Anand Parekh, created the most valuable position in Apache Corporation (NASDAQ:APA). Alyeska Investment Group had $22.7 million invested in the company at the end of the quarter. Vince Maddi and Shawn Brennan's SIR Capital Management also made a $18.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Clint Carlson's Carlson Capital, Andy Redleaf's Whitebox Advisors, and Ben Levine, Andrew Manuel and Stefan Renold's LMR Partners.

Let's now take a look at hedge fund activity in other stocks similar to Apache Corporation (NASDAQ:APA). These stocks are Hyatt Hotels Corporation (NYSE:H), Rexford Industrial Realty Inc (NYSE:REXR), ITT Inc. (NYSE:ITT), Brunswick Corporation (NYSE:BC), National Instruments Corporation (NASDAQ:NATI), CDK Global Inc (NASDAQ:CDK), and Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC). All of these stocks' market caps resemble APA's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position H,27,468490,3 REXR,24,179158,9 ITT,25,512144,-3 BC,35,1425715,12 NATI,35,259007,6 CDK,32,323704,8 TKC,5,48945,2 Average,26.1,459595,5.3 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.1 hedge funds with bullish positions and the average amount invested in these stocks was $460 million. That figure was $591 million in APA's case. Brunswick Corporation (NYSE:BC) is the most popular stock in this table. On the other hand Turkcell Iletisim Hizmetleri A.S. (NYSE:TKC) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Apache Corporation (NASDAQ:APA) is more popular among hedge funds. Our overall hedge fund sentiment score for APA is 86.7. 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 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 gained 23% in 2020 through October 30th and still beat the market by 20.1 percentage points. Unfortunately APA wasn't nearly as popular as these 10 stocks and hedge funds that were betting on APA were disappointed as the stock returned -38.2% since the end of the second quarter (through 10/30) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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

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