European Financial Stocks Extend Losses on Monday

Uncertainty reigns the Street on Monday as the international markets continue to suffer the negative reverberations of the Brexit. The pound has plunged to a 31-year low against the dollar, and London’s benchmark FTSE 100 index shed around 2%. In the US, the stock market also extended its drop on Monday and three major indexes are in the red.

Some European banking stocks are taking a hit today, including Credit Suisse Group AG (ADR) (NYSE:CS), Barclays PLC (ADR) (NYSE:BCS), Royal Bank of Scotland Group PLC (NYSE:RBS), Lloyds Banking Group PLC (ADR) (NYSE:LYG), and UBS Group AG (USA) (NYSE:UBS). Let’s take a closer look at the activity around these stocks today and analyze the hedge fund sentiment towards them.

Hedge fund sentiment is an important metric for assessing long-term profitability. At Insider Monkey, we track over 760 hedge funds, whose quarterly 13F filings we analyze to determine their collective sentiment towards several thousand stocks. However, our research has shown that the best strategy is to follow hedge funds into their small-cap picks. This approach can allow monthly returns of nearly 95 basis points above the market, as we determined through extensive backtests covering the period between 1999 and 2012 (read more details here).

Credit Suisse Down More Than 7%

Credit Suisse Group AG (ADR) (NYSE:CS)’s stock has lost over 7% today as banks and finance sector in general continue to get hurt after the UK voted to leave the European Union. Credit Suisse has slashed its year-end target for the “Footsie”. However, the firm believes that there is a 30% chance that Article 50 of the treaty of Lisbon will not be invoked during the negotiations between the UK and the EU to decide the exit strategy, resulting in less legal implications of separation of the UK from the EU. Ken Fisher’s Fisher Asset Management is one of the 10 funds from our database having positions in Credit Suisse, as of the end of the first quarter.

Barclays Trading Temporarily Suspended

Barclays PLC (ADR) (NYSE:BCS) has slid by around 20% dragged down by the Brexit.  Earlier today, BofA-Merrill Lynch downgraded the bank to “Neutral” from “Buy.” Market volatility and a falling pound after Brexit is hitting the Bank hard. Barclays’ stock trading in London was temporarily suspended following an over 18% decline on Monday morning. The massive decline triggered circuit breakers on the London Stock Exchange, which automatically bring trading to a five-minute halt if a stock goes down below 8% of its opening price. Overall, 12 funds tracked by us held long positions in Barclays PLC (ADR) (NYSE:BCS) at the end of March, having amassed $275.4 million worth of stock. Among them, Fisher Asset Management owns more than 21 million shares of the company as of March 31.

On the next page, we will discuss Royal Bank of Scotland, Lloyds Banking Group and UBS Group. 

Royal Bank of Scotland Continues to Get Thrashed

Royal Bank of Scotland Group PLC (NYSE:RBS)’s stock is also getting slammed on Monday and is down by over 11% so far. Shares of the Edinburgh-based bank, which has lost approximately $13.2 million of its market value since Thursday, went offline on the London Stock Exchange on two separate occasions due to huge losses. A total of 10 funds from our database were long Royal Bank of Scotland Group PLC (NYSE:RBS) at the end of the first quarter. Jim Simons’ Renaissance Technologies owns approximately 1.24 million shares of the company.

UK Government Drops Plan to Sell Lloyds Shares

Lloyds Banking Group PLC (ADR) (NYSE:LYG)’s stock has nosedived by more than 14% so far today. The bank lost a fifth of its value on Friday after the Brexit vote. The UK government has dropped its plans to start the sale of approximately $2.64 billion worth of retail shares it still holds in the bank from the financial crisis following uncertainty after Brexit. However, Jefferies International has reiterated its “Buy” rating for the company.  Among the funds tracked by Insider Monkey, 24 funds were bullish on TransUnion (NYSE:TRU) at the end of the first quarter of 2016. The aggregate value of their stakes was approximately $283.6 million.

JPMorgan Downgrades UBS Group

UBS Group AG (USA) (NYSE:UBS)’s stock has declined by more than 7.50% so far today. The Swiss financial services firm was downgraded by analysts at JPMorgan Chase & Co. “Underweight” from “Neutral” in a report published on Monday following the Brexit. Ken Fisher’s Fisher Asset Management owns more than 30.27 million shares of the company, as of the end of the first quarter. It was one of the 12 hedge funds from our database that held stakes in the company at the end of March.

Disclosure: none