Is Citigroup Inc. (C) A Good Stock To Buy?

Although the masses and most of the financial media blame hedge funds for their exorbitant fee structure and disappointing performance, these investors have proved to have great stock picking abilities over the years (that’s why their assets under management continue to swell). We believe hedge fund sentiment should serve as a crucial tool of an individual investor’s stock selection process, as it may offer great insights of how the brightest minds of the finance industry feel about specific stocks. After all, these people have access to the smartest analysts and expensive data/information sources that individual investors can’t match. So should one consider investing in Citigroup Inc. (NYSE:C)? The smart money sentiment can provide an answer to this question.

Citigroup Inc. (NYSE:C) investors should be aware of 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. Our calculations also showed that C 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. With all of this in mind we’re going to take a peek at the new hedge fund action regarding Citigroup Inc. (NYSE:C).

Jeffrey Ubben, Founder of ValueAct Capital and Inclusive Capital Partners

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

Heading into the fourth quarter of 2021, a total of 79 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -9% from the second quarter of 2021. By comparison, 91 hedge funds held shares or bullish call options in C a year ago. With hedge funds’ sentiment swirling, there exists a few key hedge fund managers who were boosting their stakes meaningfully (or already accumulated large positions).

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, designating 11.59 percent of its 13F equity portfolio to C.

Due to the fact that Citigroup Inc. (NYSE:C) has faced falling interest from the smart money, we can see that there exists a select few fund managers that elected to cut their entire stakes by the end of the third quarter. Intriguingly, Matthew Stadelman’s Diamond Hill Capital dumped the biggest investment of the “upper crust” of funds watched by Insider Monkey, totaling close to $61.6 million in stock, and Kahn Brothers was right behind this move, as the fund dumped about $59.2 million worth. These transactions are intriguing to say the least, as total hedge fund interest dropped by 8 funds by the end of the third quarter.

Let’s check out 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), Unilever PLC (NYSE:UL), The Charles Schwab Corporation (NYSE:SCHW), Sony Group Corp (NYSE:SONY), BHP Group (NYSE:BHP), and HDFC Bank Limited (NYSE:HDB). All of these stocks’ market caps are similar to C’s market cap.

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 28.6% in 2021 through November 30th and still beat the market by 5.6 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 -8.6% since the end of the third quarter (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 most of these stocks already outperformed the market since 2019.

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