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Did Hedge Funds Drop The Ball On Itron, Inc. (ITRI) ?

Nina Todic

Does Itron, Inc. (NASDAQ:ITRI) represent a good buying opportunity at the moment? Let’s quickly check the hedge fund interest towards the company. Hedge fund firms constantly search out bright intellectuals and highly-experienced employees and throw away millions of dollars on satellite photos and other research activities, so it is no wonder why they tend to generate millions in profits each year. It is also true that some hedge fund players fail inconceivably on some occasions, but net net their stock picks have been generating superior risk-adjusted returns on average over the years.

Itron, Inc. (NASDAQ:ITRI) investors should pay attention to an increase in support from the world's most elite money managers in recent months. Our calculations also showed that ITRI isn't among the 30 most popular stocks among hedge funds.

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (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 30.9% through May 30, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeremy Mindich - Scopia Capital

Let's take a look at the recent hedge fund action regarding Itron, Inc. (NASDAQ:ITRI).

How are hedge funds trading Itron, Inc. (NASDAQ:ITRI)?

Heading into the second quarter of 2019, a total of 15 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from one quarter earlier. By comparison, 20 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.

No of Hedge Funds with ITRI Positions

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Scopia Capital, managed by Matt Sirovich and Jeremy Mindich, holds the largest position in Itron, Inc. (NASDAQ:ITRI). Scopia Capital has a $215.8 million position in the stock, comprising 8% of its 13F portfolio. The second most bullish fund manager is Impax Asset Management, led by Ian Simm, holding a $123.2 million position; 1.7% of its 13F portfolio is allocated to the company. Remaining hedge funds and institutional investors with similar optimism contain Amy Minella's Cardinal Capital, Jim Simons's Renaissance Technologies and Ken Griffin's Citadel Investment Group.

As industrywide interest jumped, key hedge funds were leading the bulls' herd. Citadel Investment Group, managed by Ken Griffin, initiated the biggest position in Itron, Inc. (NASDAQ:ITRI). Citadel Investment Group had $8.1 million invested in the company at the end of the quarter. Benjamin A. Smith's Laurion Capital Management also initiated a $1 million position during the quarter. The following funds were also among the new ITRI investors: Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Philip Hempleman's Ardsley Partners, and Gavin Saitowitz and Cisco J. del Valle's Springbok Capital.

Let's also examine hedge fund activity in other stocks - not necessarily in the same industry as Itron, Inc. (NASDAQ:ITRI) but similarly valued. We will take a look at Flagstar Bancorp Inc (NYSE:FBC), Enanta Pharmaceuticals Inc (NASDAQ:ENTA), Verra Mobility Corporation (NASDAQ:VRRM), and ProAssurance Corporation (NYSE:PRA). This group of stocks' market values are closest to ITRI's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FBC,14,77882,2 ENTA,20,290378,0 VRRM,14,187599,1 PRA,14,153430,1 Average,15.5,177322,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $177 million. That figure was $416 million in ITRI's case. Enanta Pharmaceuticals Inc (NASDAQ:ENTA) is the most popular stock in this table. On the other hand Flagstar Bancorp Inc (NYSE:FBC) is the least popular one with only 14 bullish hedge fund positions. Itron, Inc. (NASDAQ:ITRI) is not the least popular stock in this group but hedge fund interest is still below average. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. A small number of hedge funds were also right about betting on ITRI as the stock returned 33.2% during the same time frame and outperformed the market by an even larger margin.

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

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