Is Iteris Inc (NASDAQ:ITI) a good investment right now? We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.
Is Iteris Inc (NASDAQ:ITI) a buy right now? Money managers are taking a pessimistic view. The number of long hedge fund positions were cut by 3 recently. Our calculations also showed that ITI isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video below for Q2 rankings). ITI was in 12 hedge funds’ portfolios at the end of the third quarter of 2019. There were 15 hedge funds in our database with ITI positions at the end of the previous quarter.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 91% since May 2014 and outperformed the Russell 2000 ETFs by nearly 40 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
J. Carlo Cannell of Cannell Capital
We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, “I’m investing more today than I did back in early 2009.” So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius’ weekly trade ideas. This December we recommended Adams Energy based on an under-the-radar fund manager’s investor letter and the stock gained 20 percent. We’re going to view the fresh hedge fund action regarding Iteris Inc (NASDAQ:ITI).
Hedge fund activity in Iteris Inc (NASDAQ:ITI)
At the end of the third quarter, a total of 12 of the hedge funds tracked by Insider Monkey were long this stock, a change of -20% from the previous quarter. The graph below displays the number of hedge funds with bullish position in ITI over the last 17 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Royce & Associates held the most valuable stake in Iteris Inc (NASDAQ:ITI), which was worth $9.2 million at the end of the third quarter. On the second spot was Renaissance Technologies which amassed $5.2 million worth of shares. Cannell Capital, Ardsley Partners, and Millennium Management were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Cannell Capital allocated the biggest weight to Iteris Inc (NASDAQ:ITI), around 1.31% of its 13F portfolio. Ardsley Partners is also relatively very bullish on the stock, dishing out 0.73 percent of its 13F equity portfolio to ITI.
Since Iteris Inc (NASDAQ:ITI) has faced falling interest from hedge fund managers, it’s easy to see that there were a few hedgies who sold off their entire stakes last quarter. Interestingly, Josh Goldberg’s G2 Investment Partners Management cut the largest position of all the hedgies watched by Insider Monkey, totaling about $1.5 million in stock. Paul Tudor Jones’s fund, Tudor Investment Corp, also sold off its stock, about $0.4 million worth. These moves are interesting, as aggregate hedge fund interest dropped by 3 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Iteris Inc (NASDAQ:ITI) but similarly valued. These stocks are ASA Gold and Precious Metals Ltd (NYSE:ASA), BRT Apartments Corp. (NYSE:BRT), Workhorse Group, Inc. (NASDAQ:WKHS), and Xenon Pharmaceuticals Inc (NASDAQ:XENE). This group of stocks’ market valuations match ITI’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| ASA | 3 | 14873 | 0 |
| BRT | 5 | 11630 | 1 |
| WKHS | 5 | 7670 | 2 |
| XENE | 16 | 101425 | -1 |
| Average | 7.25 | 33900 | 0.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 7.25 hedge funds with bullish positions and the average amount invested in these stocks was $34 million. That figure was $27 million in ITI’s case. Xenon Pharmaceuticals Inc (NASDAQ:XENE) is the most popular stock in this table. On the other hand ASA Gold and Precious Metals Ltd (NYSE:ASA) is the least popular one with only 3 bullish hedge fund positions. Iteris Inc (NASDAQ:ITI) 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 37.4% in 2019 through the end of November and outperformed the S&P 500 ETF (SPY) by 9.9 percentage points. Unfortunately ITI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on ITI were disappointed as the stock returned -10.1% during the fourth quarter (through the end of November) 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.
Disclosure: None. This article was originally published at Insider Monkey.
