What Hedge Funds Think About Citigroup Inc. (C)?

Is Citigroup Inc. (NYSE:C) a good stock to buy right now? We at Insider Monkey like to examine what billionaires and hedge funds think of a company before doing days of research on it. Given their 2 and 20 payment structure, hedge funds have more resources than the average investor. The funds have access to expert networks and get tips from industry insiders. They also have numerous Ivy League graduates and MBAs. Like everyone else, hedge funds perform miserably at times, but their consensus picks have historically outperformed the market after risk adjustments. More recently the top 30 mid-cap stocks (market caps between $1 billion and $10 billion) among hedge funds delivered an average return of 18% during the last four quarters (S&P 500 Index funds returned only 7.6% during the same period).

Overall, Citigroup Inc. (NYSE:C) shares haven’t seen a lot of action during the fourth quarter as the hedge fund sentiment was unchanged during the third quarter and the stock was included in the portfolios of 97 funds tracked by us at the end of September. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as PetroChina Company Limited (ADR) (NYSE:PTR), HSBC Holdings plc (ADR) (NYSE:HSBC), and Bristol Myers Squibb Co. (NYSE:BMY) to gather more data points.

In the eyes of most stock holders, hedge funds are perceived as worthless, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, We hone in on the bigwigs of this club, approximately 700 funds. These hedge fund managers handle the lion’s share of the smart money’s total asset base, and by keeping track of their top stock picks, Insider Monkey has spotted several investment strategies that have historically beaten the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy exceeded the S&P 500 index by 12 percentage points a year for a decade in their back tests.

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Keeping this in mind, we’re going to take a peek at the new action regarding Citigroup Inc. (NYSE:C).

How have hedgies been trading Citigroup Inc. (NYSE:C)?

Heading into the fourth quarter of 2016, a total of 97 of the hedge funds tracked by Insider Monkey were long this stock. With the smart money’s sentiment swirling, there exists a select group of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Eagle Capital Management, managed by Boykin Curry, holds the most valuable position in Citigroup Inc. (NYSE:C). Eagle Capital Management has a $1.27 billion position in the stock, comprising 5.5% of its 13F portfolio. On Eagle Capital Management’s heels is Robert Rodriguez and Steven Romick’s First Pacific Advisors LLC, with a $653.7 million position; 5.4% of its 13F portfolio is allocated to the stock. Other peers that are bullish encompass Edgar Wachenheim’s Greenhaven Associates, Ric Dillon’s Diamond Hill Capital and Richard S. Pzena’s Pzena Investment Management.

Because Citigroup Inc. (NYSE:C) has witnessed a decline in interest from hedge fund managers, we can see that there is a sect of hedgies that elected to cut their full holdings heading into the fourth quarter. At the top of the heap, Seth Klarman’s Baupost Group dumped the largest investment of the 700 funds followed by Insider Monkey, valued at about $219 million in ‘call’ options. Ken Griffin’s fund, Citadel Investment Group, also dumped its call options, valued at about $129.1 million. These transactions are intriguing to say the least, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now review hedge fund activity in other stocks – not necessarily in the same industry as Citigroup Inc. (NYSE:C) but similarly valued. We will take a look at PetroChina Company Limited (ADR) (NYSE:PTR), HSBC Holdings plc (ADR) (NYSE:HSBC), Bristol Myers Squibb Co. (NYSE:BMY), and British American Tobacco PLC (ADR) (NYSEAMEX:BTI). This group of stocks’ market values resemble Citigroup’s market value.

As you can see these stocks had an average of 25 hedge funds with bullish positions and the average amount invested in these stocks was $1.0 billion. That figure was $8.71 billion in Citi’s case. Bristol Myers Squibb Co. (NYSE:BMY) is the most popular stock in this table. On the other hand PetroChina Company Limited (ADR) (NYSE:PTR) is the least popular one with only 11 bullish hedge fund positions. Compared to these stocks Citigroup Inc. (NYSE:C) 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.