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Is ITT Inc. (NYSE:ITT) a good place to invest some of your money right now? We can gain invaluable insight to help us answer that question by studying the investment trends of top investors, who employ world-class Ivy League graduates, who are given immense resources and industry contacts to put their financial expertise to work. The top picks of these firms have historically outperformed the market when we account for known risk factors, making them very valuable investment ideas.
Is ITT stock a buy? Money managers were becoming less hopeful. The number of bullish hedge fund positions dropped by 2 recently. ITT Inc. (NYSE:ITT) was in 28 hedge funds' portfolios at the end of the fourth quarter of 2020. The all time high for this statistic is 30. Our calculations also showed that ITT isn't among the 30 most popular stocks among hedge funds (click for Q4 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 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 124 percentage points since March 2017 (see the details here).
Dmitry Balyasny of Balyasny Asset Management
At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, auto parts business is a recession resistant business, so we are taking a closer look at this discount auto parts stock that is growing at a 196% annualized rate. We go through lists like the 15 best micro-cap stocks to buy now to identify the next stock with 10x upside potential. 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. You can subscribe to our free daily newsletter on our website. With all of this in mind let's check out the new hedge fund action surrounding ITT Inc. (NYSE:ITT).
Do Hedge Funds Think ITT Is A Good Stock To Buy Now?
At Q4's end, a total of 28 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -7% from one quarter earlier. Below, you can check out the change in hedge fund sentiment towards ITT over the last 22 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.
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Paradice Investment Management, managed by David Paradice, holds the largest position in ITT Inc. (NYSE:ITT). Paradice Investment Management has a $110.7 million position in the stock, comprising 6.2% of its 13F portfolio. Sitting at the No. 2 spot is Adage Capital Management, managed by Phill Gross and Robert Atchinson, which holds a $96 million position; 0.2% of its 13F portfolio is allocated to the company. Some other peers that are bullish consist of Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Dmitry Balyasny's Balyasny Asset Management and Mario Gabelli's GAMCO Investors. In terms of the portfolio weights assigned to each position Humankind Investments allocated the biggest weight to ITT Inc. (NYSE:ITT), around 6.3% of its 13F portfolio. Paradice Investment Management is also relatively very bullish on the stock, setting aside 6.22 percent of its 13F equity portfolio to ITT.
Since ITT Inc. (NYSE:ITT) has witnessed declining sentiment from the aggregate hedge fund industry, we can see that there lies a certain "tier" of fund managers who were dropping their full holdings last quarter. Intriguingly, Paul Tudor Jones's Tudor Investment Corp cut the largest stake of all the hedgies followed by Insider Monkey, totaling an estimated $2.9 million in stock, and Benjamin A. Smith's Laurion Capital Management was right behind this move, as the fund cut about $1 million worth. These bearish behaviors are interesting, as total hedge fund interest was cut by 2 funds last quarter.
Let's also examine hedge fund activity in other stocks similar to ITT Inc. (NYSE:ITT). We will take a look at Futu Holdings Limited (NASDAQ:FUTU), Kilroy Realty Corp (NYSE:KRC), Casey's General Stores, Inc. (NASDAQ:CASY), Ballard Power Systems Inc. (NASDAQ:BLDP), ANGI Homeservices Inc (NASDAQ:ANGI), Woori Financial Group Inc. (NYSE:WF), and CubeSmart (NYSE:CUBE). All of these stocks' market caps match ITT's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position FUTU,17,334170,2 KRC,25,251572,6 CASY,23,120810,2 BLDP,20,200727,-1 ANGI,31,319845,-11 WF,1,3395,-1 CUBE,24,317435,6 Average,20.1,221136,0.4 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 20.1 hedge funds with bullish positions and the average amount invested in these stocks was $221 million. That figure was $407 million in ITT's case. ANGI Homeservices Inc (NASDAQ:ANGI) is the most popular stock in this table. On the other hand Woori Financial Group Inc. (NYSE:WF) is the least popular one with only 1 bullish hedge fund positions. ITT Inc. (NYSE:ITT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for ITT is 76. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 30 most popular stocks among hedge funds returned 81.2% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 26 percentage points. These stocks gained 12.3% in 2021 through April 19th and still beat the market by 0.9 percentage points. Hedge funds were also right about betting on ITT as the stock returned 20.3% since the end of Q4 (through 4/19) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
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Disclosure: None. This article was originally published at Insider Monkey.