Hedge Funds Are Pouring Into Itau Unibanco Holding SA (ADR) (ITUB) in Droves

The elite funds run by legendary investors such as Dan Loeb and David Tepper make hundreds of millions of dollars for themselves and their investors by spending enormous resources doing research on small cap stocks that big investment banks don’t follow. Because of their pay structures, they have strong incentive to do the research necessary to beat the market. That’s why we pay close attention to what they think in small cap stocks. In this article, we take a closer look at Itau Unibanco Holding SA (ADR) (NYSE:ITUB) from the perspective of those elite funds.

Itau Unibanco Holding SA (ADR) (NYSE:ITUB) has experienced an increase in activity from the world’s largest hedge funds in recent months, with 2 more hedgies owning the stock. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as BlackRock, Inc. (NYSE:BLK), The Dow Chemical Company (NYSE:DOW), and HDFC Bank Limited (ADR) (NYSE:HDB) to gather more data points.

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What have hedge funds been doing with Itau Unibanco Holding SA (ADR) (NYSE:ITUB)?

Heading into the fourth quarter of 2016, a total of 24 of the hedge funds tracked by Insider Monkey held long positions in this stock, a gain of 9% from the second quarter of 2016 and a gain of 60% from the first quarter of 2016. With the smart money’s sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, William B. Gray’s Orbis Investment Management has the biggest position in Itau Unibanco Holding SA (ADR) (NYSE:ITUB), worth close to $178.1 million, accounting for 1.2% of its total 13F portfolio. Sitting at the No. 2 spot is Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $147.7 million position. Some other members of the smart money that hold long positions include Cliff Asness’ AQR Capital Management, David Stemerman’s Conatus Capital Management and Howard Marks’ Oaktree Capital Management.

Now, some big names were breaking ground themselves. Marshall Wace LLP, managed by Paul Marshall and Ian Wace, created the most outsized position in Itau Unibanco Holding SA (ADR) (NYSE:ITUB). Marshall Wace LLP had $10.3 million invested in the company at the end of the quarter. David Halpert’s Prince Street Capital Management also made a $4.3 million investment in the stock during the quarter. The other funds with new positions in the stock are Jacob Rothschild’s RIT Capital Partners and Ken Griffin’s Citadel Investment Group.

Let’s now review hedge fund activity in other stocks similar to Itau Unibanco Holding SA (ADR) (NYSE:ITUB). These stocks are BlackRock, Inc. (NYSE:BLK), The Dow Chemical Company (NYSE:DOW), HDFC Bank Limited (ADR) (NYSE:HDB), and BT Group plc (ADR) (NYSE:BT). This group of stocks’ market values resemble ITUB’s market value.

As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.16 billion. That figure was $770 million in ITUB’s case. The Dow Chemical Company (NYSE:DOW) is the most popular stock in this table. On the other hand BT Group plc (ADR) (NYSE:BT) is the least popular one with only 7 bullish hedge fund positions. Itau Unibanco Holding SA (ADR) (NYSE:ITUB) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard DOW might be a better candidate to consider for a long position.

Disclosure: None