We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Keeping this in mind, let's take a look at whether Itron, Inc. (NASDAQ:ITRI) 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.
Itron, Inc. (NASDAQ:ITRI) has experienced a decrease in hedge fund sentiment of late. Our calculations also showed that ITRI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
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 was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 41 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 35.3% through March 3rd. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic's significance before most investors. Now let's take a gander at the fresh hedge fund action regarding Itron, Inc. (NASDAQ:ITRI).
What does smart money think about Itron, Inc. (NASDAQ:ITRI)?
Heading into the first quarter of 2020, a total of 21 of the hedge funds tracked by Insider Monkey were long this stock, a change of -16% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in ITRI a year ago. So, let's review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
The largest stake in Itron, Inc. (NASDAQ:ITRI) was held by Impax Asset Management, which reported holding $162 million worth of stock at the end of September. It was followed by Scopia Capital with a $155.9 million position. Other investors bullish on the company included Cardinal Capital, Arrowstreet Capital, and Renaissance Technologies. In terms of the portfolio weights assigned to each position Scopia Capital allocated the biggest weight to Itron, Inc. (NASDAQ:ITRI), around 12.08% of its 13F portfolio. Cardinal Capital is also relatively very bullish on the stock, earmarking 2 percent of its 13F equity portfolio to ITRI.
Seeing as Itron, Inc. (NASDAQ:ITRI) has experienced bearish sentiment from hedge fund managers, it's safe to say that there is a sect of funds that slashed their entire stakes in the third quarter. It's worth mentioning that Philip Hempleman's Ardsley Partners said goodbye to the largest position of all the hedgies tracked by Insider Monkey, comprising close to $3.4 million in stock, and David Harding's Winton Capital Management was right behind this move, as the fund said goodbye to about $1.4 million worth. These bearish behaviors are interesting, as total hedge fund interest fell by 4 funds in the third quarter.
Let's check out hedge fund activity in other stocks similar to Itron, Inc. (NASDAQ:ITRI). We will take a look at Sinopec Shanghai Petrochemical Co. (NYSE:SHI), Federated Investors Inc (NYSE:FII), Corporate Office Properties Trust (NYSE:OFC), and BancorpSouth, Inc. (NYSE:BXS). All of these 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 SHI,3,14883,-1 FII,29,236110,2 OFC,21,165223,3 BXS,14,63010,0 Average,16.75,119807,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $120 million. That figure was $456 million in ITRI's case. Federated Investors Inc (NYSE:FII) is the most popular stock in this table. On the other hand Sinopec Shanghai Petrochemical Co. (NYSE:SHI) is the least popular one with only 3 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks lost 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately ITRI wasn't nearly as popular as these 20 stocks and hedge funds that were betting on ITRI were disappointed as the stock returned -31.3% 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 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.