Hedge Funds Are Buying CIT Group Inc. (CIT)

In this article we will check out the progression of hedge fund sentiment towards CIT Group Inc. (NYSE:CIT) and determine whether it is a good investment right now. We at Insider Monkey like to examine what billionaires and hedge funds think of a company before spending days of research on it. Given their 2 and 20 payment structure, hedge funds have more incentives and resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also employ numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments.

CIT Group Inc. (NYSE:CIT) was in 30 hedge funds’ portfolios at the end of June. The all time high for this statistic is 43. CIT investors should be aware of an increase in enthusiasm from smart money of late. There were 28 hedge funds in our database with CIT holdings at the end of March. Our calculations also showed that CIT isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 79 percentage points since March 2017 (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

John Armitage of Egerton Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best EV 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. Keeping this in mind let’s review the new hedge fund action surrounding CIT Group Inc. (NYSE:CIT).

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

Heading into the third quarter of 2021, a total of 30 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 7% from the first quarter of 2020. On the other hand, there were a total of 27 hedge funds with a bullish position in CIT a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in CIT Group Inc. (NYSE:CIT) was held by Alua Capital Management, which reported holding $231.4 million worth of stock at the end of June. It was followed by Palestra Capital Management with a $143.3 million position. Other investors bullish on the company included Egerton Capital Limited, Fir Tree, and MFP Investors. In terms of the portfolio weights assigned to each position Alua Capital Management allocated the biggest weight to CIT Group Inc. (NYSE:CIT), around 12.06% of its 13F portfolio. Birch Run Capital is also relatively very bullish on the stock, setting aside 6.37 percent of its 13F equity portfolio to CIT.

Now, some big names were leading the bulls’ herd. Egerton Capital Limited, managed by John Armitage, initiated the most outsized position in CIT Group Inc. (NYSE:CIT). Egerton Capital Limited had $114.6 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $6.9 million position during the quarter. The other funds with brand new CIT positions are Lee Ainslie’s Maverick Capital, Marc Lisker, Glenn Fuhrman and John Phelan’s MSDC Management, and Ryan Tolkin (CIO)’s Schonfeld Strategic Advisors.

Let’s check out 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 Switch, Inc. (NYSE:SWCH), Apellis Pharmaceuticals, Inc. (NASDAQ:APLS), Science Applications International Corp (NYSE:SAIC), Chesapeake Energy Corporation (NASDAQ:CHK), Clean Harbors Inc (NYSE:CLH), Essent Group Ltd (NYSE:ESNT), and Companhia de Saneamento Básico do Estado de São Paulo – SABESP (NYSE:SBS). This group of stocks’ market caps match CIT’s market cap.

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.1 hedge funds with bullish positions and the average amount invested in these stocks was $606 million. That figure was $752 million in CIT’s case. Chesapeake Energy Corporation (NASDAQ:CHK) is the most popular stock in this table. On the other hand Companhia de Saneamento Básico do Estado de São Paulo – SABESP (NYSE:SBS) is the least popular one with only 11 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 57.6. 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. 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 24.9% in 2021 through October 15th and still beat the market by 4.5 percentage points. Hedge funds were also right about betting on CIT as the stock returned 2.9% since the end of Q2 (through 10/15) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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