Hedge funds and other investment firms run by legendary investors like Israel Englander, Jeffrey Talpins and Ray Dalio are entrusted to manage billions of dollars of accredited investors' money because they are without peer in the resources they use to identify the best investments for their chosen investment horizon. Moreover, they are more willing to invest a greater amount of their resources in small-cap stocks than big brokerage houses, and this is often where they generate their outperformance, which is why we pay particular attention to their best ideas in this space.
Itau Unibanco Holding SA (NYSE:ITUB) investors should be aware of an increase in support from the world's most elite money managers of late. Our calculations also showed that ITUB isn't among the 30 most popular stocks among hedge funds.
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 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 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.
Let's take a gander at the key hedge fund action encompassing Itau Unibanco Holding SA (NYSE:ITUB).
How have hedgies been trading Itau Unibanco Holding SA (NYSE:ITUB)?
Heading into the second quarter of 2019, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 17% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ITUB over the last 15 quarters. So, let's check out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Fisher Asset Management held the most valuable stake in Itau Unibanco Holding SA (NYSE:ITUB), which was worth $405.3 million at the end of the first quarter. On the second spot was Orbis Investment Management which amassed $220.5 million worth of shares. Moreover, Capital Growth Management, Oaktree Capital Management, and AQR Capital Management were also bullish on Itau Unibanco Holding SA (NYSE:ITUB), allocating a large percentage of their portfolios to this stock.
As industrywide interest jumped, key hedge funds were breaking ground themselves. Alyeska Investment Group, managed by Anand Parekh, assembled the largest position in Itau Unibanco Holding SA (NYSE:ITUB). Alyeska Investment Group had $5.7 million invested in the company at the end of the quarter. David Costen Haley's HBK Investments also initiated a $3.8 million position during the quarter. The following funds were also among the new ITUB investors: James Dondero's Highland Capital Management, Matthew Tewksbury's Stevens Capital Management, and Mike Vranos's Ellington.
Let's now review hedge fund activity in other stocks similar to Itau Unibanco Holding SA (NYSE:ITUB). These stocks are Lockheed Martin Corporation (NYSE:LMT), Banco Santander (Brasil) SA (NYSE:BSBR), Gilead Sciences, Inc. (NASDAQ:GILD), and ASML Holding N.V. (NASDAQ:ASML). All of these stocks' market caps resemble ITUB's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position LMT,35,1219528,-7 BSBR,10,160949,0 GILD,58,3780289,1 ASML,15,504431,-1 Average,29.5,1416299,-1.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $1416 million. That figure was $1087 million in ITUB's case. Gilead Sciences, Inc. (NASDAQ:GILD) is the most popular stock in this table. On the other hand Banco Santander (Brasil) SA (NYSE:BSBR) is the least popular one with only 10 bullish hedge fund positions. Itau Unibanco Holding SA (NYSE:ITUB) 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 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. A small number of hedge funds were also right about betting on ITUB, though not to the same extent, as the stock returned -0.1% during the same time frame and outperformed the market as well.
Disclosure: None. This article was originally published at Insider Monkey.