Hedge Funds Have Never Been This Bullish On Ituran Location and Control Ltd. (ITRN)

The first quarter was a breeze as Powell pivoted, and China seemed eager to reach a deal with Trump. Both the S&P 500 and Russell 2000 delivered very strong gains as a result, with the Russell 2000, which is composed of smaller companies, outperforming the large-cap stocks slightly during the first quarter. Unfortunately sentiment shifted in May as this time China pivoted and Trump put more pressure on China by increasing tariffs. Hedge funds’ top 20 stock picks performed spectacularly in this volatile environment. These stocks delivered a total gain of 18.7% through May 30th, vs. a gain of 12.1% for the S&P 500 ETF. In this article we will look at how this market volatility affected the sentiment of hedge funds towards Ituran Location and Control Ltd. (NASDAQ:ITRN), and what that likely means for the prospects of the company and its stock.

Is Ituran Location and Control Ltd. (NASDAQ:ITRN) a marvelous investment now? Hedge funds are getting more bullish. The number of bullish hedge fund positions increased by 2 lately. Our calculations also showed that itrn isn’t among the 30 most popular stocks among hedge funds. ITRN was in 11 hedge funds’ portfolios at the end of the first quarter of 2019. There were 9 hedge funds in our database with ITRN positions at the end of the previous quarter.

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’ large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 30.9% through May 30, 2019. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Jeffrey Bronchick - Cove Street Capital

We’re going to analyze the new hedge fund action regarding Ituran Location and Control Ltd. (NASDAQ:ITRN).

Hedge fund activity in Ituran Location and Control Ltd. (NASDAQ:ITRN)

At the end of the first quarter, a total of 11 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from one quarter earlier. By comparison, 10 hedge funds held shares or bullish call options in ITRN a year ago. With hedge funds’ positions undergoing their usual ebb and flow, there exists an “upper tier” of noteworthy hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

No of Hedge Funds with ITRN Positions

More specifically, Renaissance Technologies was the largest shareholder of Ituran Location and Control Ltd. (NASDAQ:ITRN), with a stake worth $47.3 million reported as of the end of March. Trailing Renaissance Technologies was Gobi Capital, which amassed a stake valued at $44 million. Simcoe Capital Management, Arrowstreet Capital, and Cove Street Capital were also very fond of the stock, giving the stock large weights in their portfolios.

As industrywide interest jumped, some big names have jumped into Ituran Location and Control Ltd. (NASDAQ:ITRN) headfirst. Arrowstreet Capital, managed by Peter Rathjens, Bruce Clarke and John Campbell, initiated the most outsized position in Ituran Location and Control Ltd. (NASDAQ:ITRN). Arrowstreet Capital had $3 million invested in the company at the end of the quarter. Chuck Royce’s Royce & Associates also made a $1.7 million investment in the stock during the quarter. The following funds were also among the new ITRN investors: Israel Englander’s Millennium Management, D. E. Shaw’s D E Shaw, and Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital.

Let’s check out hedge fund activity in other stocks similar to Ituran Location and Control Ltd. (NASDAQ:ITRN). We will take a look at Noble Corporation plc (NYSE:NE), ViewRay, Inc. (NASDAQ:VRAY), Opus Bank (NASDAQ:OPB), and HomeStreet Inc (NASDAQ:HMST). All of these stocks’ market caps match ITRN’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
NE 23 102367 -1
VRAY 23 264047 2
OPB 11 135088 1
HMST 10 15920 3
Average 16.75 129356 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 16.75 hedge funds with bullish positions and the average amount invested in these stocks was $129 million. That figure was $126 million in ITRN’s case. Noble Corporation plc (NYSE:NE) is the most popular stock in this table. On the other hand HomeStreet Inc (NASDAQ:HMST) is the least popular one with only 10 bullish hedge fund positions. Ituran Location and Control Ltd. (NASDAQ:ITRN) 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately ITRN wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); ITRN investors were disappointed as the stock returned -6.1% during the same time period 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 13 of these stocks already outperformed the market so far in Q2.

Disclosure: None. This article was originally published at Insider Monkey.