In this article, we discuss the 10 financial stocks to buy according to Ken Griffin’s Citadel Investment Group.
Ken Griffin founded Citadel Investment Group in 1990, which is a Chicago-based hedge fund with a portfolio value of $481 billion as of Q3 2021, with Griffin serving as the chief investment officer and the CEO. In the third quarter, 21.08% of Griffin’s 13F securities consisted of stocks from the finance sector, with the remaining portfolio concentrated in the information technology, industrials, healthcare, consumer discretionary, and communications sectors. Billionaire Ken Griffin grew his Q3 investments by approximately $129 billion as compared to the prior-year quarter, via quantitative investment strategies including equities, commodities, global fixed income, and credit.
Continuing to seek out growth driven and market leading companies, Griffin was one of the notable investors in the privately held Cohesion, a key player in smart building and digital twin SaaS technology, with the company using these funds for product expansion for optimizing building environment and health.
Citadel Investment Group’s multi-strategy flagship fund, Wellington, outperformed markets in September by gaining 7.8%, which resulted in a year-to-date performance of 18.5%.
Ken Griffin of Citadel Investment Group
The most notable financial stocks in Ken Griffin’s Q3 portfolio include Arthur J. Gallagher & Co. (NYSE:AJG), Morgan Stanley (NYSE:MS), Mastercard Incorporated (NYSE:MA), and Bank of America Corporation (NYSE:BAC), among others discussed in detail below.
Our Methodology
We used the Q3 portfolio of Ken Griffin’s Citadel Investment Group to select his top 10 financial stocks, ranking the companies according to Griffin’s stake value in each holding.
For further context on each company, we have mentioned important comparison metrics like the Q3 performance, analyst ratings, and the hedge fund sentiment surrounding each stock.
Financial Stocks to Buy According to Ken Griffin’s Citadel Investment Group
10. Blackstone Inc. (NYSE:BX)
Citadel Investment Group’s Stake Value: $160,475,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: 54
Blackstone Inc. (NYSE:BX), a New York-based private equity and alternative investment management firm, posted on October 21 its Q3 results. EPS in the quarter equaled $1.28, beating estimates by $0.36. Revenue over the period totaled $3.04 billion, increasing 108.54% year-over-year, outperforming estimates by $872.28 million.
On November 4, BofA analyst Craig Siegenthaler reinstated coverage of Blackstone Inc. with a Buy rating and a $182 price target, implying 30%-35% total return potential, stating that the company has a “special opportunity” to grow in the retail channel, which will drive earnings growth above expectations.
Citadel Investment Group increased its stake in Blackstone Inc. by 46% in the third quarter, holding 1.37 million shares worth $160.4 million. Overall, 54 hedge funds in the Q3 database of Insider Monkey were bullish on Blackstone Inc., with total stakes amounting to $2.5 billion.
Rajiv Jain’s GQG Partners is the biggest Blackstone Inc. stakeholder from Q3 2021, with 6.33 million shares worth $736.8 million.
In addition to Arthur J. Gallagher & Co., Morgan Stanley, Mastercard Incorporated, and Bank of America Corporation, Blackstone Inc. is a notable financial stock from Ken Griffin’s Q3 portfolio.
Here is what Artisan Partners has to say about Blackstone Inc. in its Q3 2021 investor letter:
“Among our top Q3 contributors were Blackstone. Investment stalwart Blackstone’s virtuous cycle is in full swing. Throughout Blackstone’s history, excellent investment performance and capital protection have allowed the firm to increase fundraising in existing verticals as well as launch new endeavors. Historically, less than 10% of assets under management mature in any given year, and that number should move lower with continued growth in perpetual capital vehicles. Blackstone’s A+ rated balance sheet and capital-light model are the backbone of its 85% of cash flow distribution policy via a variable quarterly dividend. In short, this is a long-duration fee stream and robust capital-raising engine.”
9. MetLife, Inc. (NYSE:MET)
Citadel Investment Group’s Stake Value: $161,614,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: 39
MetLife, Inc. (NYSE:MET) is a leading American provider of life insurance, annuities, and employee benefit programs, serving customers across more than 60 countries. In the third quarter, 39 hedge funds were long MetLife, Inc., holding stakes worth $1.14 billion, with Pzena Investment Management being the leading company stakeholder.
Ken Griffin, via Citadel Investment Group, owns 2.61 million MetLife, Inc. shares, worth $161.6 million, representing 0.03% of the hedge fund’s total investments for the third quarter.
MetLife, Inc. reported solid Q3 results on November 3, posting an EPS of $2.39, beating estimates by $0.68. Revenue over the quarter totaled $17.09 billion, outperforming estimates by $805.82 million, making MetLife, Inc. one of the top financial stocks from Ken Griffin’s Q3 portfolio.
Goldman Sachs analyst Alex Scott initiated coverage of MetLife, Inc. on December 2 with a Buy rating and a $77 price target, stating that MetLife, Inc. is positioned to succeed in the U.S. and Mexico Employee Benefits market, has growth opportunities in Asia, and enjoys a sizable excess capital position that could grow as the company carries out further strategic initiatives.
8. State Street Corporation (NYSE:STT)
Citadel Investment Group’s Stake Value: $169,656,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.03%
Number of Hedge Fund Holders: 42
Ken Griffin increased his stake in State Street Corporation (NYSE:STT) in the third quarter by 65%, owning over 2 million shares of the company, valued at $169.65 million. State Street Corporation is one of the leading American bank holding companies, and it is the largest custodian bank worldwide. Offering services including investment management, foreign exchange, stock trading, and securities lending, State Street Corporation is one of the top financial stocks to buy according to Ken Griffin’s Citadel Investment Group.
On October 18, State Street Corporation announced Q3 earnings, posting earnings per share of $2, exceeding estimates by $0.08. The revenue totaled $2.99 billion, up 7.4% from the prior-year quarter, beating estimates by $22.36 million.
Citi analyst Keith Horowitz on October 22 raised the price target on State Street Corporation to $115 from $100 and kept a Buy rating on the shares post the Q3 results.
At the end of September, 42 hedge funds tracked by Insider Monkey reported owning stakes in State Street Corporation, up from 37 funds in the previous quarter. Harris Associates is the largest State Street Corporation stakeholder in Q3, with 4.86 million shares worth $412.2 million.
7. Arthur J. Gallagher & Co. (NYSE:AJG)
Citadel Investment Group’s Stake Value: $207,115,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.04%
Number of Hedge Fund Holders: 32
Arthur J. Gallagher & Co., one of the largest global insurance brokers, represents 0.04% of Ken Griffin’s total Q3 13F securities. Griffin holds 1.39 million Arthur J. Gallagher & Co. shares as of September this year, amounting to $207.1 million. Griffin increased his position in the company by 345% in Q3, making Arthur J. Gallagher & Co. one of the best financial stocks according to the billionaire.
Arthur J. Gallagher & Co., on October 28, reported its Q3 results. Earnings per share came in at $1.33, beating estimates by $0.12. The quarterly revenue gained 16.49% year-over-year, totaling $2.11 billion, exceeding estimates by $153.8 million.
Jefferies analyst Yaron Kinar initiated coverage of Arthur J. Gallagher & Co. on November 18 with a Buy rating and a $205 price target. The analyst expects Arthur J. Gallagher & Co. to continue to execute well on organic growth while outgrowing its peers, and believes that the company will do so without compromising on margins.
By the end of September, 32 hedge funds were bullish on Arthur J. Gallagher & Co., with total stakes valued at $1.38 billion. Millennium Management is one of the largest Arthur J. Gallagher & Co. stakeholders from the third quarter, increasing its stake in the company by 9672% as compared to the previous quarter, holding a $139.2 million position.
6. Global Payments Inc. (NYSE:GPN)
Citadel Investment Group’s Stake Value: $231,919,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.04%
Number of Hedge Fund Holders: 68
Global Payments Inc. (NYSE:GPN) is a financial technology company providing a connected infrastructure that serves multiple dimensions of commerce, conducting billions of secure monetary transactions every year. Ken Griffin’s stake in Global Payments Inc. increased by 15% in the third quarter, with the billionaire owning 1.47 million Global Payments Inc. shares worth $231.9 million.
On November 2, Global Payments Inc. reported earnings for the third quarter, posting an EPS of $2.18, beating estimates by $0.03. The quarterly revenue gained 14.57% year-over-year, exceeding estimates by $10.29 million.
Barclays analyst Ramsey El-Assal on December 10 lowered the price target on Global Payments Inc. to $182 from $195 and kept an Overweight rating on the shares. The analyst observed that Global Payments Inc.’s organic performance so far in Q4 has “proven resilient”. However, he lowered Q4 margins “a bit” so they are accurately aligned with company guidance.
Of the 68 hedge funds that were long Global Payments Inc. in the third quarter, Orbis Investment Management is the leading company stakeholder, with an approximately $500 million position.
Global Payments Inc. is one of the best financial stocks to buy according to Ken Griffin’s Citadel Investment Group, just like Arthur J. Gallagher & Co., Morgan Stanley, Mastercard Incorporated, and Bank of America Corporation.
Here is what Artisan Mid-Cap Fund has to say about Global Payments Inc. in its Q3 2021 investor letter:
“Global Payments has delivered solid results so far this year and recently revised its 2021 outlook upward. However, shares have been pressured as investors weigh the competitive threat from faster growing emerging payments companies. We have spent significant time contemplating this risk, and given our belief the company will not completely thwart the competition, we trimmed our position size. That said, we still believe Global Payments belongs in the CropSM of our portfolio. The company has long been shifting its business away from legacy payments technology toward durable growth areas such as software and omnichannel commerce. Furthermore, it is making substantial cloud investments in partnership with Google and Amazon Web Services to future-proof its underlying technology stack. These decisions lead us to believe management’s targets (~10% revenue growth, ~20% EPS growth) remain achievable and should lead to solid stock returns over the longer term.”
5. M&T Bank Corporation (NYSE:MTB)
Citadel Investment Group’s Stake Value: $249,054,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.05%
Number of Hedge Fund Holders: 27
M&T Bank Corporation, one of the best financial stocks to buy according to Ken Griffin, announced on November 16 a quarterly cash dividend of $1.20 per share on its common stock. This reflects an increase of 9% from the previous $1.10 per share Q3 dividend. The dividend will be payable on December 31 to shareholders of record on November 30.
The New York-based M&T Bank Corporation offers customers a range of financial services including retail banking, investment banking, commercial banking, investment management, and private banking. Ken Griffin holds a $249 million position in M&T Bank Corporation as of the third quarter of 2021.
On October 20, M&T Bank Corporation posted solid Q3 results. EPS in the quarter equaled $5.06, topping estimates by $1.56. The quarterly revenue increased 4.97% year-over-year to $1.54 billion, exceeding estimates by $63.21 million.
Citi analyst Jill Shea raised the firm’s price target on M&T Bank Corporation to $180 from $170 and reiterated a Buy rating on the shares on October 25, citing the strong Q3 results and M&T Bank Corporation’s capacity for improved commercial loan growth as reasons for the Buy rating.
Adage Capital Management is one of the leading M&T Bank Corporation stakeholders from Q3, with a $137.8 million stake. Overall, 27 hedge funds monitored by Insider Monkey reported owning stakes in M&T Bank Corporation at the end of September, worth $774.2 million.
4. Morgan Stanley (NYSE:MS)
Citadel Investment Group’s Stake Value: $249,979,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.05%
Number of Hedge Fund Holders: 65
Ken Griffin owns 2.56 million shares in Morgan Stanley, an American multinational investment bank and financial services company, worth approximately $250 million, representing 0.05% of the billionaire’s Q3 portfolio. Morgan Stanley is one of the best financial stocks to buy as per Ken Griffin’s Citadel Investment Group.
On October 14, Morgan Stanley reported earnings for the third quarter, posting an EPS of $2.04, beating estimates by $0.36. Revenue over the period jumped 26.56% year-over-year to $14.75 billion, outperforming estimates by $799.47 million.
Citi analyst Keith Horowitz on December 3 upgraded Morgan Stanley to Buy from Neutral with a price target of $115, up from $105. The analyst stated that the stock offers “high quality at a reasonable price”, with multiple growth catalysts.
The largest Morgan Stanley stakeholder from the third quarter is Eagle Capital Management, with a $1.46 billion position in the company. Overall, the Q3 database of Insider Monkey reported that 65 hedge funds were bullish on the stock, down from 69 funds in the previous quarter.
Here is what Artisan Value Fund has to say about Morgan Stanley in its Q3 2021 investor letter:
“Morgan Stanley, a leading global financial services company, came into the portfolio in late 2020 as a result of its purchase of E*TRADE. The acquisition is a great fit for Morgan Stanley’s wealth management platform and provides a considerable amount of non-interest-bearing deposit funding. James Gorman, chairman and CEO, has steadily de-risked the business by adding less volatile fee streams to complement its leading positions in cyclical businesses such as advisory, equities and FICC (fixed income, currencies and commodities). We believe the company will prove its resiliency and value over the long term.”
3. Capital One Financial Corporation (NYSE:COF)
Citadel Investment Group’s Stake Value: $279,963,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.05%
Number of Hedge Fund Holders: 55
Capital One Financial Corporation (NYSE:COF) is an American financial corporation facilitating customers with banking facilities, credit cards, savings accounts, and auto loans. Citadel Investment Group holds a $279.9 million position in Capital One Financial Corporation, increasing its stake in the company by 130% in the third quarter.
Capital One Financial Corporation reported a strong third quarter performance on October 26, with earnings per share of $6.86, exceeding estimates by $1.66. The Q3 revenue equaled $7.83 billion, surpassing revenue estimates by almost $381 million.
On December 1, Baird analyst David George upgraded Capital One Financial Corporation to Neutral from Underperform with an unchanged price target of $145.
A total of 55 hedge funds were long Capital One Financial Corporation by September end, with Harris Associates being the leading company stakeholder, owning a $946.1 million position as of Q3 2021.
Here is what ClearBridge Investments has to say about Capital One Financial Corporation in its Q2 2021 investor letter:
“Portfolio holdings in the communication services and financial sectors also made strong contributions… In financials, Capital One has also benefited, at least indirectly, from government stimulus that has strengthened customer balance sheets and driven credit losses to record lows. Capital One should also benefit from a reopening of the economy and increased discretionary spending.”
2. Bank of America Corporation (NYSE:BAC)
Citadel Investment Group’s Stake Value: $341,886,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.07%
Number of Hedge Fund Holders: 72
Being among the most well known multinational American investment banks and financial services holding companies, Bank of America Corporation is considered one of the best financial stocks in Ken Griffin’s third quarter portfolio. The billionaire increased his stake in Bank of America Corporation by 23% in Q3, holding over 8 million shares worth $341.8 million.
Bank of America Corporation posted its Q3 results on October 14, reporting earnings per share of $0.85, beating estimates by $0.15. The $22.77 billion revenue was up 11.33% year-over-year, outperforming estimates by $1.16 billion.
On December 9, UBS analyst Erika Najarian assumed coverage of Bank of America Corporation with a Buy rating and a $64 price target. Bank of America Corporation is the analyst’s top pick among the U.S. large cap banks, and she said the stock is positioned to be a potential cyclical and secular winner in the coming cycle.
Out of the 867 hedge funds tracked by Insider Monkey as of Q3 2021, 72 hedge funds were long Bank of America Corporation, down from 87 funds in the prior quarter. Berkshire Hathaway is the biggest Bank of America Corporation stakeholder from the third quarter, holding over 1 billion shares worth $42.8 billion.
Here is what Oakmark Funds has to say about Bank of America Corporation in its Q3 2021 investor letter:
“Earlier this year, one of our holdings, Bank of America, announced that it was raising its minimum hourly wage from $15 to $20 and would increase it to $25 by 2025. The company received great press for placing the well-being of its employees above profits. But was it really either/or? Bank of America’s chief human resources officer spoke to the bigger picture: “A core tenet of responsible growth is our commitment to being a great place to work…that includes providing strong pay and competitive benefits to help them and their families, so that we continue to attract and retain the best talent.” Bank of America understood that engaged, high-caliber employees are more productive, less prone to turnover and, therefore, less expensive in the long run. Increasing the pay for employees wasn’t elevating employees above shareholders; it was the right thing to do for employees and for shareholders.
If an increase to $20 was good, why stop there? Why not $50 per hour? Because the benefits the business receives at $50 don’t justify the expense. The bank would no longer be able to price its products competitively and would lose business. The employees would “win” in the short term, but eventually the lost business would lead to job cuts, meaning both employees and shareholders would lose. The negative effects of stakeholder overreach are no different than when CEOs overreach to inflate short-term profits. Both hurt shareholders and stakeholders.”
1. Mastercard Incorporated (NYSE:MA)
Citadel Investment Group’s Stake Value: $519,535,000
Percentage of Citadel Investment Group’s 13F Portfolio: 0.10%
Number of Hedge Fund Holders: 146
Mastercard Incorporated is the best financial stock to buy according to Ken Griffin’s Citadel Investment Group, in addition to being immensely popular among the hedge funds. In the third quarter, 146 funds reported owning stakes in Mastercard Incorporated, valued at $17.65 billion. Akre Capital Management is the largest Mastercard Incorporated stakeholder from Q3, with a position worth more than $2 billion.
Ken Griffin holds a $519.5 million stake in Mastercard Incorporated as of September this year, which accounts for 0.1% of his total Q3 investments. Mastercard Incorporated is a financial services corporation that offers credit cards and payment systems worldwide.
Mastercard Incorporated, on October 28, reported earnings for the third quarter. EPS in the period totaled $2.37, exceeding estimates by $0.18. The $4.99 billion revenue was up 29.92% year-over-year, beating revenue estimates by $35.79 million.
Mastercard Incorporated declared a quarterly dividend of $0.49 per share on November 30, up from $0.40 in the previous quarter. The cash dividend will be paid on February 9, 2022 to shareholders of record on January 7, 2022.
UBS analyst Rayna Kumar assumed coverage of Mastercard Incorporated on November 17 with a Buy rating and a $448 price target. The analyst believes that the largest growth opportunities for Mastercard Incorporated are in Latin America, Asia Pacific, the Middle East, and Africa.
Here is what Polen Capital has to say about Mastercard Incorporated in its Q3 2021 investor letter:
“Mastercard faced pressure as some believe these “old payment infrastructure” businesses will be disrupted by newer fintech companies using blockchain, buy now, pay later (BNPL), or other innovations to provide better/cheaper payment services. However, we believe that some of these technologies have meaningful limitations which could benefit existing payment networks. For example, BNPL transactions are often funded with cards and turn a one-time transaction into many smaller ones with more transaction fees for Mastercard. Just like with regulation, we continually monitor for competition and technological disruption. As of now, we do not see a significant risk in the foreseeable future to this company.”
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This article is originally published at Insider Monkey.
