Most investors tend to think that hedge funds and other asset managers are worthless, as they cannot beat even simple index fund portfolios. In fact, most people expect hedge funds to compete with and outperform the bull market that we have witnessed in recent years. However, hedge funds are generally partially hedged and aim at delivering attractive risk-adjusted returns rather than following the ups and downs of equity markets hoping that they will outperform the broader market. Our research shows that certain hedge funds do have great stock picking skills (and we can identify these hedge funds in advance pretty accurately), so let’s take a glance at the smart money sentiment towards CIT Group Inc. (NYSE:CIT).
Is CIT a good stock to buy? CIT Group Inc. (NYSE:CIT) shareholders have witnessed a decrease in hedge fund sentiment in recent months. CIT Group Inc. (NYSE:CIT) was in 29 hedge funds’ portfolios at the end of the third quarter of 2021. 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 Q3 rankings).
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. Now let’s analyze the recent hedge fund action encompassing CIT Group Inc. (NYSE:CIT).
Michael Price of MFP Investors
Do Hedge Funds Think CIT Is A Good Stock To Buy Now?
At the end of September, a total of 29 of the hedge funds tracked by Insider Monkey were long this stock, a change of -3% from the previous quarter. By comparison, 27 hedge funds held shares or bullish call options in CIT a year ago. With the smart money’s sentiment swirling, there exists an “upper tier” of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).
Among these funds, Alua Capital Management held the most valuable stake in CIT Group Inc. (NYSE:CIT), which was worth $233 million at the end of the third quarter. On the second spot was Egerton Capital Limited which amassed $194.1 million worth of shares. Fir Tree, MFP Investors, and Millennium Management 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 Alua Capital Management allocated the biggest weight to CIT Group Inc. (NYSE:CIT), around 12.02% of its 13F portfolio. Birch Run Capital is also relatively very bullish on the stock, designating 8.87 percent of its 13F equity portfolio to CIT.
Due to the fact that CIT Group Inc. (NYSE:CIT) has faced bearish sentiment from hedge fund managers, we can see that there were a few funds who sold off their full holdings heading into Q4. It’s worth mentioning that Andrew Immerman and Jeremy Schiffman’s Palestra Capital Management sold off the biggest position of the “upper crust” of funds followed by Insider Monkey, comprising close to $143.3 million in stock, and Dmitry Balyasny’s Balyasny Asset Management was right behind this move, as the fund said goodbye to about $24.7 million worth. These moves are intriguing to say the least, as total hedge fund interest was cut by 1 funds heading into Q4.
Let’s also examine hedge fund activity in other stocks similar to CIT Group Inc. (NYSE:CIT). These stocks are Bright Health Group Inc. (NYSE:BHG), Hayward Holdings, Inc. (NYSE:HAYW), Callaway Golf Company (NYSE:ELY), New Residential Investment Corp (NYSE:NRZ), BWX Technologies Inc (NYSE:BWXT), NOV Inc. (NYSE:NOV), and Unum Group (NYSE:UNM). All of these stocks’ market caps are similar to CIT’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BHG | 14 | 529306 | -9 |
| HAYW | 18 | 135092 | -1 |
| ELY | 38 | 443868 | -1 |
| NRZ | 16 | 93063 | -4 |
| BWXT | 17 | 168813 | -3 |
| NOV | 34 | 982583 | 4 |
| UNM | 30 | 350040 | 7 |
| Average | 23.9 | 386109 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.9 hedge funds with bullish positions and the average amount invested in these stocks was $386 million. That figure was $715 million in CIT’s case. Callaway Golf Company (NYSE:ELY) is the most popular stock in this table. On the other hand Bright Health Group Inc. (NYSE:BHG) is the least popular one with only 14 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 55.5. 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 28.6% in 2021 through November 30th and beat the market again by 5.6 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 -4.9% since the end of September (through 11/30) 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.
Follow Cit Group Inc (NYSE:CIT)
Follow Cit Group Inc (NYSE:CIT)
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Disclosure: None. This article was originally published at Insider Monkey.
