Citigroup Inc. (NYSE:C) announced easily beating Wall Street’s earnings expectations today, posting adjusted earnings of $4.85 billion, or $1.51 per share, up from $0.03 per share in the year-ago quarter, on revenues of $19.5 billion, up from $19.38 billion in the same quarter last year. Without adjustments, the bank earned $1.45 per share. Analysts were expecting the third-largest U.S. bank by assets to post EPS of $1.34 on revenues of $19.1 billion. According to CEO Michael Corbat, Citigroup Inc. (NYSE:C)’s performance for the second quarter showed a very balanced performance across its business units. The second quarter profit is the highest Citigroup has posted in eight years. The win for the company in the second quarter comes after nearly all of its profits in the same year-ago quarter were wiped out by a $7 billion settlement with the U.S. Department of Justice in a case regarding mortgage-backed securities. Shares of Citigroup have shot up by 3.47% today in late morning trading.
Citigroup Inc. (NYSE:C)’s solid beat for the second quarter coincides with great enthusiasm from hedge funds in the first quarter. Holdings of funds long in Citigroup had increased by 3.18% quarter-over-quarter to $11.63 billion by March 31, highlighted by the fact that the financial giant’s stock slid 4.79% in the first quarter. However, a total of 126 of the hedge funds tracked by Insider Monkey were long in this stock at the end of the first quarter, down from 137 in the fourth quarter. This means those who stayed long in the stock notably increased their holdings, and the stock was still the fourth-most popular among the funds we track, despite the ownership dip. The world’s top money managers were proven right when the stock went up by 7.22% in the second quarter.
At Insider Monkey, we track hedge funds’ moves in order to identify actionable patterns and profit from them. Our research has shown that hedge funds’ large-cap stock picks historically delivered a monthly alpha of six basis points, though these stocks underperformed the S&P 500 Total Return Index by an average of seven basis points per month between 1999 and 2012. On the other hand, the 15 most popular small-cap stocks among hedge funds outperformed the S&P 500 Index by an average of 95 basis points per month (read the details here). Since the official launch of our small-cap strategy in August 2012, it has performed just as predicted, returning over 139% and beating the market by more than 80 percentage points. We believe the data is clear: investors will be better off by focusing on small-cap stocks utilizing hedge fund expertise rather than large-cap stocks.
Insider Monkey also tracks insider moves in companies such as Citigroup to see whether executives inside these companies are confident in their firms’ shares. Although insiders of Citigroup have not purchased shares so far this year, there have been several sales. The most recent were three sales, all on May 21, by Head of Human Resources Michael Joseph Murray, who sold 5,949 shares, Chief Risk Officer Bradford Hu, who sold 9,742 shares, and CEO, Latin America Francisco Aristeguieta, who sold 3,800 shares.
Keeping these in mind, let’s check out the latest key smart money activity regarding Citigroup Inc.
What have hedge funds been doing with Citigroup Inc. (NYSE:C)?
When looking at the hedgies followed by Insider Monkey, Boykin Curry‘s Eagle Capital Management had the biggest position in Citigroup Inc. (NYSE:C) at the end of March, owning 26.35 million shares worth close to $1.36 billion, accounting for 5% of its total 13F portfolio. The second-largest stake was held by Fisher Asset Management, led by Ken Fisher, holding a $602.3 million position in 11.69 million shares; 1.2% of its 13F portfolio was allocated to the stock. Some other hedgies with similar optimism consist of Mike Masters’ Masters Capital Management, and Richard S. Pzena’s Pzena Investment Management.
Glenview Capital, managed by Larry Robbins, established the largest position in Citigroup Inc. (NYSE:C) in the first quarter. Glenview Capital had $276.4 million invested in the company at the end of the quarter, buying 5.37 million shares. Other bullish funds with brand new Citigroup positions includes Thomas E. Claugus’ GMT Capital, Kenneth Mario Garschina’s Mason Capital Management, Christian Leone’s Luxor Capital Group, and Benjamin A. Smith’s Laurion Capital Management. Leading the bears’ herd in the first quarter was Dan Loeb’s Third Point, which said goodbye to the largest stake of all the hedgies watched by Insider Monkey, totaling close to $270.55 million, made up of 5.0 million shares.
Due to the bullish sentiment of hedge funds on the stock in addition to the solid performance reported for the second quarter, we recommend a long position in Citigroup Inc. (NYSE:C) now.
Disclosure: None
