Investing in small cap stocks has historically been a way to outperform the market, as small cap companies typically grow faster on average than the blue chips. That outperformance comes with a price, however, as there are occasional periods of higher volatility. The time period between June 25 and the end of October was one of those periods, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by more than 14 percentage points. Given that the funds we track tend to have a disproportionate amount of their portfolios in smaller cap stocks, they have seen some volatility in their portfolios too. Actually, their moves are potentially one of the factors that contributed to this volatility. In this article, we use our extensive database of hedge fund holdings to find out what the smart money thinks of ITT Corp (NYSE:ITT).
Is ITT Corp (NYSE:ITT) a superb stock to buy now? Prominent investors are selling. The number of long hedge fund bets were cut by 3 lately. At the end of this article we will also compare ITT to other stocks, including Methanex Corporation (USA) (NASDAQ:MEOH), Cognex Corporation (NASDAQ:CGNX), and United States Cellular Corporation (NYSE:USM) to get a better sense of its popularity.
Follow Itt Inc. (NYSE:ITT)
Follow Itt Inc. (NYSE:ITT)
To most stock holders, hedge funds are assumed to be worthless, outdated financial vehicles of years past. While there are over 8000 funds with their doors open at present, Our experts look at the crème de la crème of this club, approximately 700 funds. These money managers manage bulk of the hedge fund industry’s total asset base, and by tracking their first-class investments, Insider Monkey has found numerous investment strategies that have historically outpaced the broader indices. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.
Keeping this in mind, let’s analyze the recent action regarding ITT Corp (NYSE:ITT).
How have hedgies been trading ITT Corp (NYSE:ITT)?
At the Q3’s end, a total of 27 of the hedge funds tracked by Insider Monkey were long this stock, a change of -10% from the previous quarter. With hedgies’ sentiment swirling, there exists a few notable hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alyeska Investment Group, managed by Anand Parekh, holds the most valuable position in ITT Corp (NYSE:ITT). Alyeska Investment Group has a $48.7 million position in the stock, comprising 0.6% of its 13F portfolio. Coming in second is AQR Capital Management, managed by Cliff Asness, which holds a $48.5 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors that are bullish consist of Ken Griffin’s Citadel Investment Group, Mario Gabelli’s GAMCO Investors and Lee Munder’s Lee Munder Capital Group.
Judging by the fact that ITT Corp (NYSE:ITT) has faced falling interest from the entirety of the hedge funds we track, logic holds that there lies a certain “tier” of hedgies that slashed their entire stakes last quarter. Interestingly, Paul Marshall and Ian Wace’s Marshall Wace LLP dropped the biggest stake of all the hedgies tracked by Insider Monkey, worth close to $25.6 million in stock, and Michael Platt and William Reeves’ BlueCrest Capital Mgmt. was right behind this move, as the fund dumped about $8.2 million worth of shares. These moves are important to note, as aggregate hedge fund interest fell by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as ITT Corp (NYSE:ITT) but similarly valued. We will take a look at Methanex Corporation (USA) (NASDAQ:MEOH), Cognex Corporation (NASDAQ:CGNX), United States Cellular Corporation (NYSE:USM), and Controladora Vuela Co Avcn SA CV (ADR) (NYSE:VLRS). This group of stocks’ market values are closest to ITT’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| MEOH | 19 | 229003 | -3 |
| CGNX | 14 | 127632 | -8 |
| USM | 12 | 147318 | -3 |
| VLRS | 12 | 58989 | 3 |
As you can see these stocks had an average of 14 hedge funds with bullish positions and the average amount invested in these stocks was $141 million, compared to $278 million in ITT’s case. Methanex Corporation (USA) (NASDAQ:MEOH) is the most popular stock in this table with 19 funds reporting long positions, while United States Cellular Corporation (NYSE:USM) is the least popular one. Compared to these stocks ITT Corp (NYSE:ITT) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
