The market has been volatile as the Federal Reserve continues its rate hikes to normalize the interest rates. Small cap stocks have been hit hard as a result, as the Russell 2000 ETF (IWM) has underperformed the larger S&P 500 ETF (SPY) by about 4 percentage points through November 16th. SEC filings and hedge fund investor letters indicate that the smart money seems to be paring back their overall long exposure since summer months, and the funds’ movements is one of the reasons why the major indexes have retraced. In this article, we analyze what the smart money thinks of Citizens Financial Group Inc (NYSE:CFG) and find out how it is affected by hedge funds’ moves.
Citizens Financial Group Inc (NYSE:CFG) was in 42 hedge funds’ portfolios at the end of the third quarter of 2018. CFG has seen a decrease in hedge fund sentiment in recent months. There were 47 hedge funds in our database with CFG holdings at the end of the previous quarter. Our calculations also showed that CFG isn’t among the 30 most popular stocks among hedge funds.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s flagship best performing hedge funds strategy returned 6.3% year to date (through December 3rd) and outperformed the market even though it draws its stock picks among small-cap stocks. This strategy also outperformed the market by 18 percentage points since its inception (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
We’re going to take a look at the key hedge fund action encompassing Citizens Financial Group Inc (NYSE:CFG).
How are hedge funds trading Citizens Financial Group Inc (NYSE:CFG)?
At Q3’s end, a total of 42 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -11% from the previous quarter. On the other hand, there were a total of 41 hedge funds with a bullish position in CFG at the beginning of this year. With hedgies’ positions undergoing their usual ebb and flow, there exists a select group of noteworthy hedge fund managers who were adding to their holdings considerably (or already accumulated large positions).
The largest stake in Citizens Financial Group Inc (NYSE:CFG) was held by Citadel Investment Group, which reported holding $431.9 million worth of stock at the end of September. It was followed by Carlson Capital with a $145.8 million position. Other investors bullish on the company included D E Shaw, GLG Partners, and EJF Capital.
Because Citizens Financial Group Inc (NYSE:CFG) has witnessed declining sentiment from the smart money, it’s easy to see that there was a specific group of hedgies that elected to cut their full holdings last quarter. It’s worth mentioning that Jim Simons’s Renaissance Technologies sold off the biggest investment of the 700 funds watched by Insider Monkey, totaling about $65.8 million in stock. David Tepper’s fund, Appaloosa Management LP, also dumped its stock, about $48.9 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 5 funds last quarter.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Citizens Financial Group Inc (NYSE:CFG) but similarly valued. We will take a look at AMETEK, Inc. (NYSE:AME), Apache Corporation (NYSE:APA), Plains All American Pipeline, L.P. (NYSE:PAA), and FirstEnergy Corp. (NYSE:FE). This group of stocks’ market valuations match CFG’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| AME | 33 | 1185675 | -4 |
| APA | 26 | 882116 | 9 |
| PAA | 10 | 49421 | 0 |
| FE | 38 | 3701409 | 10 |
| Average | 26.75 | 1454655 | 3.75 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 26.75 hedge funds with bullish positions and the average amount invested in these stocks was $1.46 billion. That figure was $1.56 billion in CFG’s case. FirstEnergy Corp. (NYSE:FE) is the most popular stock in this table. On the other hand Plains All American Pipeline, L.P. (NYSE:PAA) is the least popular one with only 10 bullish hedge fund positions. Compared to these stocks Citizens Financial Group Inc (NYSE:CFG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
