Should You Avoid Amplify Energy Corp. (AMPY)?

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of Amplify Energy Corp. (NYSE:AMPY).

Is Amplify Energy Corp. (NYSE:AMPY) worth your attention right now? Investors who are in the know are in a pessimistic mood. The number of bullish hedge fund positions dropped by 3 in recent months. Our calculations also showed that AMPY isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. 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 58 percentage points since March 2017 (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.

Jeffrey Tannenbaum of Fir Tree

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We interview hedge fund managers and ask them about their best ideas. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind we’re going to check out the fresh hedge fund action surrounding Amplify Energy Corp. (NYSE:AMPY).

Hedge fund activity in Amplify Energy Corp. (NYSE:AMPY)

At the end of the first quarter, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -15% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards AMPY over the last 18 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).

Among these funds, Fir Tree held the most valuable stake in Amplify Energy Corp. (NYSE:AMPY), which was worth $5.9 million at the end of the third quarter. On the second spot was Brigade Capital which amassed $2.3 million worth of shares. Avenue Capital, Renaissance Technologies, and Oaktree 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 Avenue Capital allocated the biggest weight to Amplify Energy Corp. (NYSE:AMPY), around 1.19% of its 13F portfolio. Fir Tree is also relatively very bullish on the stock, earmarking 0.52 percent of its 13F equity portfolio to AMPY.

Judging by the fact that Amplify Energy Corp. (NYSE:AMPY) has witnessed falling interest from the aggregate hedge fund industry, logic holds that there was a specific group of hedgies that elected to cut their full holdings heading into Q4. Interestingly, David Rosen’s Rubric Capital Management sold off the biggest investment of the 750 funds tracked by Insider Monkey, totaling about $5.8 million in stock, and Frederick DiSanto’s Ancora Advisors was right behind this move, as the fund sold off about $1.7 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest fell by 3 funds heading into Q4.

Let’s go over hedge fund activity in other stocks similar to Amplify Energy Corp. (NYSE:AMPY). We will take a look at Youngevity International, Inc. (NASDAQ:YGYI), voxeljet AG (NYSE:VJET), DarioHealth Corp. (NASDAQ:DRIO), and General Moly, Inc. (NYSE:GMO). This group of stocks’ market caps are similar to AMPY’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 1.5 hedge funds with bullish positions and the average amount invested in these stocks was $0 million. That figure was $11 million in AMPY’s case. General Moly, Inc. (NYSE:GMO) is the most popular stock in this table. On the other hand Youngevity International, Inc. (NASDAQ:YGYI) is the least popular one with only 1 bullish hedge fund positions. Compared to these stocks Amplify Energy Corp. (NYSE:AMPY) is more popular among hedge funds. 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 returned 13.4% in 2020 through June 22nd but still managed to beat the market by 15.9 percentage points. Hedge funds were also right about betting on AMPY as the stock returned 170.2% so far in Q2 (through June 22nd) 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.

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