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Did Hedge Funds Make The Right Call On Itron, Inc. (ITRI) ?

Debasis Saha

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Itron, Inc. (NASDAQ:ITRI) based on that data and determine whether they were really smart about the stock.

Is Itron, Inc. (NASDAQ:ITRI) a sound investment today? Prominent investors were reducing their bets on the stock. The number of long hedge fund bets were cut by 2 lately. Our calculations also showed that ITRI 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.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings 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'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Richard Driehaus of Driehaus Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Cannabis stocks are roaring back in 2020, so we are checking out this under-the-radar stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. Keeping this in mind we're going to analyze the fresh hedge fund action regarding Itron, Inc. (NASDAQ:ITRI).

Hedge fund activity in Itron, Inc. (NASDAQ:ITRI)

At the end of the first quarter, a total of 19 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. By comparison, 15 hedge funds held shares or bullish call options in ITRI a year ago. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is ITRI A Good Stock To Buy?
Is ITRI A Good Stock To Buy?

Among these funds, Impax Asset Management held the most valuable stake in Itron, Inc. (NASDAQ:ITRI), which was worth $123 million at the end of the third quarter. On the second spot was Scopia Capital which amassed $56.2 million worth of shares. Cardinal Capital, Arrowstreet Capital, and Driehaus Capital 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 Scopia Capital allocated the biggest weight to Itron, Inc. (NASDAQ:ITRI), around 5.14% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, setting aside 1.7 percent of its 13F equity portfolio to ITRI.

Seeing as Itron, Inc. (NASDAQ:ITRI) has experienced declining sentiment from the aggregate hedge fund industry, it's easy to see that there exists a select few hedgies who sold off their positions entirely in the first quarter. At the top of the heap, Josh Goldberg's G2 Investment Partners Management sold off the biggest stake of the "upper crust" of funds watched by Insider Monkey, valued at close to $2.1 million in stock. Bernard Lambilliotte's fund, Ecofin Ltd, also sold off its stock, about $1.8 million worth. These bearish behaviors are important to note, as total hedge fund interest dropped by 2 funds in the first quarter.

Let's go over hedge fund activity in other stocks similar to Itron, Inc. (NASDAQ:ITRI). These stocks are Quaker Chemical Corp (NYSE:KWR), Vivint Smart Home, Inc. (NYSE:VVNT), ViaSat, Inc. (NASDAQ:VSAT), and Old National Bancorp (NYSE:ONB). This group of stocks' market caps resemble ITRI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KWR,8,120286,-1 VVNT,9,6514,-6 VSAT,21,947696,-5 ONB,15,20462,1 Average,13.25,273740,-2.75 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.25 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $247 million in ITRI's case. ViaSat, Inc. (NASDAQ:VSAT) is the most popular stock in this table. On the other hand Quaker Chemical Corp (NYSE:KWR) is the least popular one with only 8 bullish hedge fund positions. Itron, Inc. (NASDAQ:ITRI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we'd rather spend our time researching stocks that hedge funds are piling on. 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 18.6% in 2020 through July 27th but beat the market by 17.1 percentage points. Unfortunately ITRI wasn't nearly as popular as these 10 stocks and hedge funds that were betting on ITRI were disappointed as the stock returned 24.1% during the same time period 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 many of these stocks already outperformed the market so far this year.

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

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