In this article we will check out the progression of hedge fund sentiment towards Investors Title Company (NASDAQ:ITIC) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.
Investors Title Company (NASDAQ:ITIC) shareholders have witnessed an increase in enthusiasm from smart money in recent months. ITIC was in 5 hedge funds' portfolios at the end of March. There were 4 hedge funds in our database with ITIC positions at the end of the previous quarter. Our calculations also showed that ITIC 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.
[caption id="attachment_193030" align="aligncenter" width="400"] Tom Gayner of Markel Gayner Asset Management[/caption]
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, 2020’s unprecedented market conditions provide us with the highest number of trading opportunities in a decade. So we are checking out stocks recommended/scorned by legendary Bill Miller. 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. Now we're going to take a gander at the key hedge fund action regarding Investors Title Company (NASDAQ:ITIC).
How are hedge funds trading Investors Title Company (NASDAQ:ITIC)?
At the end of the first quarter, a total of 5 of the hedge funds tracked by Insider Monkey were long this stock, a change of 25% from the fourth quarter of 2019. The graph below displays the number of hedge funds with bullish position in ITIC over the last 18 quarters. With hedgies' sentiment swirling, there exists a select group of notable hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).
The largest stake in Investors Title Company (NASDAQ:ITIC) was held by Markel Gayner Asset Management, which reported holding $27.3 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $3.2 million position. Other investors bullish on the company included Two Sigma Advisors, Millennium Management, and Royce & Associates. In terms of the portfolio weights assigned to each position Markel Gayner Asset Management allocated the biggest weight to Investors Title Company (NASDAQ:ITIC), around 0.51% of its 13F portfolio. Renaissance Technologies is also relatively very bullish on the stock, dishing out 0.0031 percent of its 13F equity portfolio to ITIC.
Consequently, specific money managers were breaking ground themselves. Millennium Management, managed by Israel Englander, initiated the most valuable position in Investors Title Company (NASDAQ:ITIC). Millennium Management had $0.3 million invested in the company at the end of the quarter.
Let's check out hedge fund activity in other stocks similar to Investors Title Company (NASDAQ:ITIC). We will take a look at SmartFinancial, Inc. (NASDAQ:SMBK), Galera Therapeutics, Inc. (NASDAQ:GRTX), Minerva Neurosciences, Inc (NASDAQ:NERV), and Houghton Mifflin Harcourt Co (NASDAQ:HMHC). All of these stocks' market caps match ITIC's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SMBK,7,19483,-1 GRTX,5,33282,-1 NERV,16,28688,0 HMHC,20,67758,-2 Average,12,37303,-1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 12 hedge funds with bullish positions and the average amount invested in these stocks was $37 million. That figure was $31 million in ITIC's case. Houghton Mifflin Harcourt Co (NASDAQ:HMHC) is the most popular stock in this table. On the other hand Galera Therapeutics, Inc. (NASDAQ:GRTX) is the least popular one with only 5 bullish hedge fund positions. Compared to these stocks Investors Title Company (NASDAQ:ITIC) is even less popular than GRTX. Hedge funds dodged a bullet by taking a bearish stance towards ITIC. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 8.3% in 2020 through the end of May but managed to beat the market by 13.2 percentage points. Unfortunately ITIC wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); ITIC investors were disappointed as the stock returned -1.5% during the second quarter (through the end of May) 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 most of these stocks already outperformed the market so far in 2020.
Disclosure: None. This article was originally published at Insider Monkey.