Citigroup Inc (C), American International Group Inc (AIG), JPMorgan Chase & Co. (JPM) Rank as Billionaires Top Financial Picks

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It’s no secret that rich investors like to invest in financial stocks. Most billionaires out of those that we track as part of our small-cap strategy have at least one financial company among their stock picks. Even though most banks and insurance stocks tanked during the financial crisis of 2008-2009, this didn’t scare investors away, due to the high profitability of these companies, which also have some of the highest profit margins across sectors. Warren Buffett holds around 46% of Berkshire’s equity portfolio tied in financial stocks, while  his top five holdings include large stakes in Wells Fargo & Co (NYSE:WFC) and American Express Company (NYSE:AXP). Moreover Berkshire Hathaway has 100% ownership in five large insurance and finance companies, including GEICO and General Re. In an interview earlier this year, Buffett said that he likes the banking system in the current environment. Billionaire Leon Cooperman also owns stakes in several big bangs among his largest positions and last year said that the financial sector is one of the most lucrative for investors to find value. With this in mind, we have compiled a list of three stocks, which ranked as the most popular among 60 billionaires from our list according to the latest round of 13F filings.

hedge fund research

We are interested in the activity of billionaire investors due to their great stock picking skills. Even though they invest mostly in large- and mega-cap stocks with prospects for a long-term gain, smaller investors can still benefit from their investment acumen. The focus is to imitate their small-cap picks, because we determined that these stocks can beat the market by nearly one percentage point per month and deliver a double-digit annual alpha. Since we launched our strategy in August 2012, we managed to obtain returns north of 130%, beating the S&P 500 ETF (SPY) by around 80 percentage points in the last 2.5 years (read more details here).

Citigroup Inc (NYSE:C) stands on the first spot as the most popular financial pick among billionaires. With 18 billionaires disclosing ownership of more than $2.98 billion worth of stock, Citigroup also ranks as the second-most popular stock among billionaires and since 126 funds among those we track disclosed holding long positions with an aggregate value of $11.63 billion, it also ranked as the fourth-most popular stock among hedge funds. It’s no surprise that billionaires and smaller investors like Citigroup Inc (NYSE:C) the most among all banks. It earned the highest score at the latest stress test conducted by the Fed, which is a significant improvement after it failed the same test last year. As a result, Citigroup Inc (NYSE:C) boosted its dividend to $0.05 from $0.01 and got approval to increase its buyback program, which now totals $7.8 billion. Among the funds we track, billionaire Ken Fisher‘s Fisher Asset Management holds 11.69 million shares of Citigroup valued at $602.35 million as of the end of March. Billionaires Andreas Halvorsen and Ken Griffin also disclosed substantial stakes in their latest 13F filings.

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