Is APA Corporation (APA) Going to Burn These Hedge Funds?

The 800+ hedge funds and famous money managers tracked by Insider Monkey have already compiled and submitted their 13F filings for the second quarter, which unveil their equity positions as of June 30th. We went through these filings, fixed typos and other more significant errors and identified the changes in hedge fund portfolios. Our extensive review of these public filings is finally over, so this article is set to reveal the smart money sentiment towards APA Corporation (NASDAQ:APA).

APA Corporation (NASDAQ:APA) investors should be aware of a decrease in hedge fund interest in recent months. APA Corporation (NASDAQ:APA) was in 37 hedge funds’ portfolios at the end of June. 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 Q2 rankings).

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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

John Paulson of Paulson & Co

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, we like undervalued, EBITDA-positive growth stocks, so we are checking out stock pitches like this emerging biotech stock. 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. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let’s go over the latest hedge fund action regarding APA Corporation (NASDAQ:APA).

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

At Q2’s end, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -12% from the previous quarter. By comparison, 40 hedge funds held shares or bullish call options in APA a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in APA Corporation (NASDAQ:APA) was held by D E Shaw, which reported holding $228.2 million worth of stock at the end of June. It was followed by Paulson & Co with a $86.5 million position. Other investors bullish on the company included Citadel Investment Group, Masters Capital Management, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Kettle Hill Capital Management allocated the biggest weight to APA Corporation (NASDAQ:APA), around 4.72% of its 13F portfolio. Paulson & Co is also relatively very bullish on the stock, designating 2.07 percent of its 13F equity portfolio to APA.

Because APA Corporation (NASDAQ:APA) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there was a specific group of hedge funds who were dropping their entire stakes by the end of the second quarter. Intriguingly, Mike Masters’s Masters Capital Management sold off the biggest stake of all the hedgies followed by Insider Monkey, worth close to $26.9 million in stock, and Ben Jacobs’s Anomaly Capital Management was right behind this move, as the fund said goodbye to about $26.3 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 5 funds by the end of the second quarter.

Let’s check out 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 First Citizens BancShares Inc. (NASDAQ:FCNCA), Fate Therapeutics Inc (NASDAQ:FATE), ContextLogic Inc. (NASDAQ:WISH), Kilroy Realty Corp (NYSE:KRC), Nutanix, Inc. (NASDAQ:NTNX), Tilray, Inc. (NASDAQ:TLRY), and OneMain Holdings Inc (NYSE:OMF). This group of stocks’ market caps are closest to APA’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 27.9 hedge funds with bullish positions and the average amount invested in these stocks was $870 million. That figure was $619 million in APA’s case. OneMain Holdings Inc (NYSE:OMF) is the most popular stock in this table. On the other hand Tilray, Inc. (NASDAQ:TLRY) is the least popular one with only 17 bullish hedge fund positions. APA Corporation (NASDAQ:APA) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for APA is 66.3. 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 gained 21.8% in 2021 through October 11th and still beat the market by 4.4 percentage points. Hedge funds were also right about betting on APA as the stock returned 13.1% since the end of Q2 (through 10/11) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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