Hedge Funds Fled eBay, GM, and 3 Other Stocks in Q1

It is important for a retail investor to be wary of companies that are losing considerable favor with smart money investors, which likely signals a fundamental shift in the valuation, growth prospects, or performance of the company or its sector. While some hedge funds are known for a contrarian brand of investing, which involves betting against the general market perception in stocks, an everyday investor doesn’t have the expertise or the resources to play the market this way. Hence, based on the latest round of 13F filings, we have formulated a list of stocks that suffered a major loss of support during the first quarter from the funds tracked by Insider Monkey, which investors of these stocks should consider.

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Today there are dozens of tools investors can use to grade their holdings. A duo of the most under-the-radar tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce their index-focused peers by a very impressive margin (see the details here).

5. Citizens Financial Group Inc (NYSE:CFG)

 – Investors with Long Positions (as of March 31): 51

 – Aggregate Value of Investors’ Holdings (as of March 31): $1.25 Billion

The number of hedge funds bullish on the $12.61 billion retail bank holding company dropped by 16 during the first three months of the year. This continues a trend of extreme volatility being seen in this stock, in terms of its hedge fund ownership, which has fluctuated wildly up and down during several recent quarters. Even though Citizens Financial Group Inc (NYSE:CFG)’s first quarter earnings of $0.41 per share beat the consensus estimate by $0.02 and its revenue of $1.23 billion was in-line with expectations, the stock is down by a significant 10% on a year-to-date basis. Cliff Asness‘ AQR Capital Management cut its stake in Citizens Financial Group Inc (NYSE:CFG) by 21% to 6.02 million shares during the first quarter.

4. eBay Inc (NASDAQ:EBAY)

 – Investors with Long Positions (as of March 31): 57

 – Aggregate Value of Investors’ Holdings (as of March 31): $2.0 Billion

The number of hedgies holding eBay Inc (NASDAQ:EBAY) in their portfolios among those in our database also dropped by 16 during the March quarter. The stock has come under slightly greater selling pressure than Citizens Financial this year, losing about 11.5% of its value, partly due to both Barclays and Morgan Stanley recently downgrading the e-commerce company to ‘Underweight’ from ‘Equal-weight’. Renowned activist investor Dan Loeb of Third Point sold out his fund’s stake in eBay Inc (NASDAQ:EBAY) during the first quarter, which consisted of 4 million shares at the end of 2015.

On the next page we’ll discuss three more stocks that were vacated in droves by top hedge funds in the first quarter.

3. EOG Resources Inc (NYSE:EOG)

 – Investors with Long Positions (as of March 31): 33

 – Aggregate Value of Investors’ Holdings (as of March 31): $631.33 Million

Even though EOG Resources Inc (NYSE:EOG) shares inched up by 2.5% in the first quarter, the aggregate value of hedge funds’ holdings in the Houston-based Oil & Gas Exploration and Production company dropped by a hefty 30% during the period, while the number of shareholders fell by 18. A series of downgrades from Susquehanna, Johnson Rice, and KLR Group hounded the company in May, although its shares remain up by about 10% in the second quarter. However, many analysts believe the Eagle Ford crude oil producer’s current valuation is too high given the turmoil in the oil markets, but the company has made some interesting developments of late. After three years of testing in four successful pilot projects, EOG Resources Inc (NYSE:EOG) recently confirmed the success of its internally-developed EOR (Enhanced Oil Recovery) process. Ric Dillon‘s Diamond Hill Capital slashed its holding in EOG by 20% during the first quarter, to 2.02 million shares.

2. General Motors Company (NYSE:GM)

 – Investors with Long Positions (as of March 31): 67

 – Aggregate Value of Investors’ Holdings (as of March 31): $3.72 Billion

The number of hedge funds tracked by Insider Monkey which were long General Motors Company (NYSE:GM) fell by 17 during the March quarter. The automaker, for which the cost of ignition switch defects has topped $2 billion, recently announced that it will compensate 135,000 SUV owners for overstating fuel economy ratings by one-to-two miles per gallon. So far this year, General Motor’s stock price has depreciated by about 7.73%. Anand Parekh‘s Alyeska Investment Group cut its General Motors Company (NYSE:GM) holding by 18% to 1.31 million shares during the first quarter.

1. Sunedison Inc (OTCMKTS:SUNEQ)

 – Investors with Long Positions (as of March 31): 26

 – Aggregate Value of Investors’ Holdings (as of March 31): $25.48 Million

Lastly is the developer and seller of photovoltaic energy solutions, which is now undergoing bankruptcy proceedings. Just recently, Sunedison Inc (OTCMKTS:SUNEQ) secured a deal to receive a $1.34 billion loan that will allow it to operate during the trying period that has now befallen the company after it took on unsustainable amounts of debt to speed up its growth. The number of hedge funds betting on the company’s revival nearly halved during the first quarter, plummeting by 24, while the value of hedgies’ holdings in the stock cratered by 95% to just over $25 million. Phill Gross and Robert Atchinson‘s Adage Capital Management liquidated its entire Sunedison Inc (OTCMKTS:SUNEQ) stake comprising 17 million shares during the first quarter.

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