Chip Rewey, the portfolio manager for Third Avenue Value Fund, reduced the fund’s stake in Apache Corp (APA, Financial) by selling 344,400 shares of the company during the third quarter. The trade had a -1.56% impact on the Third Avenue Value Fund’s portfolio. It now owns 322,700 shares of the company.
Apache Corp has a market cap of $23.96 billion, an enterprise value of $33.24 billion, a price-book (P/B) ratio of 3.35, a price-sales (P/S) ratio of 4.67 and a quick ratio of 1.76.
Apache Corp is an independent energy company that explores for, develops and produces natural gas, crude oil and natural gas liquids. The company currently has exploration and production interests in four countries: the U.S., Canada, Egypt and the U.K (North Sea). The company’s mission is to grow an innovative, safe, environmentally responsible and profitable manner for the long-term benefit of its shareholders.
According to GuruFocus, Apache Corp has a 3 of 10 financial strength rating with a cash to debt ratio of 0.14 and an equity to asset ratio of 0.29. It has a Piotroski F-Score of 2, which usually implies a poor business operation. The company also has a 3 of 10 profitability and growth rating with an operating margin of -305.31%, a net-margin of -261.91%, a ROE of -183,41% and a ROA of -54.85%.
Apache has four severe warning signs that investors should pay attention to.
- The company has a low Piotroski F-Score of 2, which usually implies a poor business operation.
- The company’s sloan ratio represents poor quality of earnings. When a Sloan Ratio (-142.12%) is higher than 25% or lower than -25%, earnings are more likely to be made up of accruals.
- Apache Corp’s revenue has been in decline for the previous five years at an average annual rate of -26.50% per year.
- Apache Corp’s gross margin has been in long-term decline at an average rate of -3% per year over the previous five years.
On May 25, Third Avenue Management (Trades, Portfolio) commented on Apache:
"Apache surprised many investors by reporting decent quarterly earnings. Most importantly, additional funding was not needed given its solid financial position. As most energy peers are battling stressed balance sheets, we were pleased (but not surprised) Apache avoided raising capital at a disadvantageous time."
Since Chip Rewey reduced Third Avenue Value Fund’s stake in Apache, the company’s market price has gained an estimated 16%. Over the past year, Apache’s market price has increased by an estimated 41%.
Below is a Peter Lynch chart that shows Apache is currently trading above its intrinsic value.
Disclosure:Ă‚ Author does not own any shares of this company.
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