CIT Group Inc. (CIT) Fell Out Of Favor With Hedge Funds

In this article we will analyze whether CIT Group Inc. (NYSE:CIT) is a good investment right now by following the lead of some of the best investors in the world and piggybacking their ideas. There’s no better way to get these firms’ immense resources and analytical capabilities working for us than to follow their lead into their best ideas. While not all of these picks will be winners, our research shows that these picks historically outperformed the market by double digits annually.

Is CIT Group Inc. (NYSE:CIT) a cheap stock to buy now? Investors who are in the know were reducing their bets on the stock. The number of bullish hedge fund bets were trimmed by 3 lately. CIT Group Inc. (NYSE:CIT) was in 28 hedge funds’ portfolios at the end of March. The all time high for this statistic is 43. Our calculations also showed that CIT isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 115 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, economists warn of inflation flare up. So, we are checking out this backdoor gold play that has hit peak gains of 718% in a little over a year. We go through lists like the 10 best battery stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind we’re going to take a peek at the latest hedge fund action surrounding CIT Group Inc. (NYSE:CIT).

Do Hedge Funds Think CIT Is A Good Stock To Buy Now?

At Q1’s end, a total of 28 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -10% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CIT over the last 23 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their stakes substantially (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Alua Capital Management, managed by Tom Purcell and Marco Tablada, holds the largest position in CIT Group Inc. (NYSE:CIT). Alua Capital Management has a $231 million position in the stock, comprising 13% of its 13F portfolio. The second most bullish fund manager is Palestra Capital Management, led by Andrew Immerman and Jeremy Schiffman, holding a $167.9 million position; the fund has 3.5% of its 13F portfolio invested in the stock. Other hedge funds and institutional investors with similar optimism consist of Jeffrey Tannenbaum’s Fir Tree, Quincy Lee’s Ancient Art (Teton Capital) and James Parsons’s Junto Capital Management. In terms of the portfolio weights assigned to each position Alua Capital Management allocated the biggest weight to CIT Group Inc. (NYSE:CIT), around 13.02% of its 13F portfolio. Highline Capital Management is also relatively very bullish on the stock, dishing out 7.86 percent of its 13F equity portfolio to CIT.

Seeing as CIT Group Inc. (NYSE:CIT) has faced declining sentiment from hedge fund managers, we can see that there is a sect of hedge funds that decided to sell off their full holdings by the end of the first quarter. Intriguingly, Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC cut the biggest stake of the 750 funds followed by Insider Monkey, totaling an estimated $46 million in stock. John Orrico’s fund, Water Island Capital, also dropped its stock, about $22.7 million worth. These transactions are important to note, as aggregate hedge fund interest fell by 3 funds by the end of the first quarter.

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as CIT Group Inc. (NYSE:CIT) but similarly valued. We will take a look at Galapagos NV (NASDAQ:GLPG), Avis Budget Group Inc. (NASDAQ:CAR), ASGN Incorporated (NYSE:ASGN), Flowserve Corporation (NYSE:FLS), Cyberark Software Ltd (NASDAQ:CYBR), Valmont Industries, Inc. (NYSE:VMI), and Exponent, Inc. (NASDAQ:EXPO). This group of stocks’ market valuations are closest to CIT’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 23.1 hedge funds with bullish positions and the average amount invested in these stocks was $445 million. That figure was $802 million in CIT’s case. Cyberark Software Ltd (NASDAQ:CYBR) is the most popular stock in this table. On the other hand Exponent, Inc. (NASDAQ:EXPO) is the least popular one with only 17 bullish hedge fund positions. CIT Group Inc. (NYSE:CIT) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CIT is 58.2. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. 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 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 24% in 2021 through July 9th and beat the market again by 6.7 percentage points. Unfortunately CIT wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CIT were disappointed as the stock returned -5.8% since the end of March (through 7/9) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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