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Why APA is Underperforming the Sector and Why That May Change

Drilling

There are times when I look at the price and performance of a stock as compared to the performance of the underlying company and just scratch my head. That could be because momentum has pushed a price way too high, as happened a lot a couple of years ago with some of the so-called meme stocks, or it could be that a stubbornly low price seems to be completely detached from reality, as is the case right now with APA Corporation (APA).

Figure 1: APA 1-Year 1-Day Chart

One of the things I have learned over the last forty years of making a living from markets, though, is that, when that happens, it is far more likely that I have missed something than it is that the majority of smart, highly paid, and very well-informed institutional traders and investors have. I have therefore dug quite deep into why APA is trading at a 52-week low. There seem to be reasons, but none of them put me off buying the stock at these levels.

Following a great 2021 and 2022 when energy stocks played catch up after years of lagging the overall market the last year has been a bit disappointing for the sector. However, even in that context, APA has been a stinker…

Figure 2: XLE (blue body) versus APA (green line) 1-Year Chart

The question is why APA has underperformed and has kept heading lower, even as oil has bounced back a bit and most stocks in the sector have at least stabilized, if not actually recovered somewhat. One cannot know for sure, of course,…





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