Laughing Water Capital, an investment management firm, published its first quarter 2021 investor letter – a copy of which can be downloaded here. A net return of 25.8% was delivered by the fund for the Q1 of 2021, ahead of its S&P 500 and Russell 2000 benchmark that delivered a 6.2% and 12.7% return respectively in the same period. You can view the fund’s top 5 holdings to have a peek at their top bets for 2021.
Laughing Water Capital, in their Q1 2021 investor letter, mentioned Iteris, Inc. (NASDAQ: ITI) and shared their insights on the company. Iteris, Inc. is a Santa Ana, California-based software and consulting services provider that currently has a $268.1 million market capitalization. Since the beginning of the year, ITI delivered a 19.82% return, extending its 12-month gains to 74.04%. As of April 23, 2021, the stock closed at $6.77 per share.
Here is what Laughing Water Capital has to say about Iteris, Inc. in their Q1 2021 investor letter:
“Iteris Inc (ITI) – In early March, Iteris, our intelligent traffic management business, received a takeover proposal that valued the stock between $8.15 and $8.50 per share. The board rejected this proposal and elected to run a formal sale process which is on-going. Shares remain ~25% below the rejected bid.
For several years I have written in these letters that I believed Iteris has enormous strategic value, and would ultimately be sold to a larger player. This view has been informed by conversations with industry experts, as well as comparable transaction analysis that has seen reasonably similar companies trade hands at more than 4x revenue and high teens EBITDA multiples, while subscale Iteris has lingered at less than 2x revenue and an EBITDA multiple that is essentially meaningless as Iteris has been unable to get leverage on their corporate level costs.
Iteris has a touchpoint with half of the signalized intersections in America through their traffic sensors and systems, and the data that their products produce and collect should be valuable to any company that is interested in the future of smart cities. While not directly comparable, for a point of reference in December Amazon announced they would be partnering with BlackBerry’s automotive data platform, and Blackberry’s stock added more than $1 billion to its market cap on the news. Auctions for other companies in the space have been attended by everyone from tech giants, to cable companies, to traditional
engineering & consulting companies. Based on recent transactions and some reasonable guesses regarding the potential for synergies, I would expect that Iteris could fetch between $9 – $12 and bring this 5+ year investment to a close at some point in the next 6-12 months.”
Our calculations show that Iteris, Inc. (NASDAQ: ITI) does not belong in our list of the 30 Most Popular Stocks Among Hedge Funds. As of the end of the fourth quarter of 2020, Iteris, Inc. was in 12 hedge fund portfolios, compared to 11 funds in the third quarter. ITI delivered a -0.73% return in the past 3 months.
The top 10 stocks among hedge funds returned 231.2% between 2015 and 2020, and outperformed the S&P 500 Index ETFs by more than 126 percentage points. We know it sounds unbelievable. You have been dismissing our articles about top hedge fund stocks mostly because you were fed biased information by other media outlets about hedge funds’ poor performance. You could have doubled the size of your nest egg by investing in the top hedge fund stocks instead of dumb S&P 500 ETFs. Here you can watch our video about the top 5 hedge fund stocks right now. All of these stocks had positive returns in 2020.
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Disclosure: None. This article is originally published at Insider Monkey.
