We know that hedge funds generate strong, risk-adjusted returns over the long run, which is why imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, professional investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do. However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, let’s examine the smart money sentiment towards Citigroup Inc. (NYSE:C) and determine whether hedge funds skillfully traded this stock.
Citigroup Inc. (NYSE:C) shareholders have witnessed a decrease in support from the world’s most elite money managers recently. Citigroup Inc. (NYSE:C) was in 79 hedge funds’ portfolios at the end of September. The all time high for this statistic is 121. There were 87 hedge funds in our database with C holdings at the end of June. Our calculations also showed that C isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
Jeffrey Ubben, Founder of ValueAct Capital and Inclusive Capital Partners
At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. Keeping this in mind we’re going to go over the recent hedge fund action encompassing Citigroup Inc. (NYSE:C).
Do Hedge Funds Think C Is A Good Stock To Buy Now?
At the end of September, a total of 79 of the hedge funds tracked by Insider Monkey were long this stock, a change of -9% from the previous quarter. By comparison, 91 hedge funds held shares or bullish call options in C 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.
More specifically, Eagle Capital Management was the largest shareholder of Citigroup Inc. (NYSE:C), with a stake worth $1393.4 million reported as of the end of September. Trailing Eagle Capital Management was ValueAct Capital, which amassed a stake valued at $971.7 million. Pzena Investment Management, First Pacific Advisors LLC, and Citadel Investment Group were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Oldfield Partners allocated the biggest weight to Citigroup Inc. (NYSE:C), around 12.39% of its 13F portfolio. Masters Capital Management is also relatively very bullish on the stock, dishing out 11.59 percent of its 13F equity portfolio to C.
Seeing as Citigroup Inc. (NYSE:C) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there lies a certain “tier” of hedgies who were dropping their full holdings last quarter. It’s worth mentioning that Matthew Stadelman’s Diamond Hill Capital dropped the biggest investment of all the hedgies watched by Insider Monkey, valued at about $61.6 million in stock. Kahn Brothers, also sold off its stock, about $59.2 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 8 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Citigroup Inc. (NYSE:C) but similarly valued. These stocks are Royal Bank of Canada (NYSE:RY), Lowe’s Companies, Inc. (NYSE:LOW), The Unilever Group (NYSE:UL), The Charles Schwab Corporation (NYSE:SCHW), Sony Group Corp (NYSE:SONY), BHP Group (NYSE:BHP), and HDFC Bank Limited (NYSE:HDB). This group of stocks’ market valuations resemble C’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| RY | 16 | 1103417 | -2 |
| LOW | 60 | 5080325 | -3 |
| UL | 17 | 876681 | -2 |
| SCHW | 59 | 4578571 | -13 |
| SONY | 19 | 388862 | -1 |
| BHP | 18 | 899835 | 0 |
| HDB | 40 | 1794819 | 1 |
| Average | 32.7 | 2103216 | -2.9 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 32.7 hedge funds with bullish positions and the average amount invested in these stocks was $2103 million. That figure was $5587 million in C’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Citigroup Inc. (NYSE:C) is more popular among hedge funds. Our overall hedge fund sentiment score for C is 66.6. 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 29.6% in 2021 and still beat the market by 3.6 percentage points. Unfortunately, C wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on C were disappointed as the stock returned -6.5% since the end of the third quarter (through 1/31) 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 all of these stocks already outperformed the market since 2019.
Follow Citigroup Inc (NYSE:C)
Follow Citigroup Inc (NYSE:C)
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Disclosure: None. This article was originally published at Insider Monkey.
