Do Hedge Funds Love Citizens Financial Group Inc (CFG)?

Hedge funds and large money managers usually invest with a focus on the long-term horizon and, therefore, short-lived dips or bumps on the charts usually don’t make them change their opinion towards a company. This time it may be different. The coronavirus pandemic destroyed the high correlations among major industries and asset classes. We are now in a stock pickers market where fundamentals of a stock have more effect on the price than the overall direction of the market. As a result we observe sudden and large changes in hedge fund positions depending on the news flow. Let’s take a look at the hedge fund sentiment towards Citizens Financial Group Inc (NYSE:CFG) to find out whether there were any major changes in hedge funds’ views.

Is Citizens Financial Group Inc (NYSE:CFG) an excellent investment right now? Prominent investors were taking a bullish view. The number of bullish hedge fund positions improved by 3 lately. Citizens Financial Group Inc (NYSE:CFG) was in 41 hedge funds’ portfolios at the end of the first quarter of 2021. The all time high for this statistic is 67. Our calculations also showed that CFG isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings). There were 38 hedge funds in our database with CFG positions at the end of the fourth quarter.

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 monthly stock picks returned 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

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David Siegel of Two Sigma Advisors

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Now let’s go over the key hedge fund action regarding Citizens Financial Group Inc (NYSE:CFG).

Do Hedge Funds Think CFG Is A Good Stock To Buy Now?

At the end of the first quarter, a total of 41 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 8% from the previous quarter. By comparison, 46 hedge funds held shares or bullish call options in CFG a year ago. With the smart money’s positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were upping their stakes meaningfully (or already accumulated large positions).

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Matthew Lindenbaum’s Basswood Capital has the largest position in Citizens Financial Group Inc (NYSE:CFG), worth close to $80.9 million, amounting to 3.7% of its total 13F portfolio. On Basswood Capital’s heels is Two Sigma Advisors, led by John Overdeck and David Siegel, holding a $52.3 million position; the fund has 0.1% of its 13F portfolio invested in the stock. Other peers that are bullish consist of Zach Schreiber’s Point State Capital, Israel Englander’s Millennium Management and D. E. Shaw’s D E Shaw. In terms of the portfolio weights assigned to each position Soapstone Capital allocated the biggest weight to Citizens Financial Group Inc (NYSE:CFG), around 10.31% of its 13F portfolio. Basswood Capital is also relatively very bullish on the stock, earmarking 3.65 percent of its 13F equity portfolio to CFG.

As one would reasonably expect, specific money managers have been driving this bullishness. Point State Capital, managed by Zach Schreiber, established the biggest position in Citizens Financial Group Inc (NYSE:CFG). Point State Capital had $46.2 million invested in the company at the end of the quarter. Peter Seuss’s Prana Capital Management also initiated a $9 million position during the quarter. The other funds with brand new CFG positions are Clint Carlson’s Carlson Capital, Peter Muller’s PDT Partners, and Qing Li’s Sciencast Management.

Let’s check out hedge fund activity in other stocks similar to Citizens Financial Group Inc (NYSE:CFG). These stocks are Ubiquiti Inc. (NYSE:UI), CGI Inc. (NYSE:GIB), MarketAxess Holdings Inc. (NASDAQ:MKTX), Coupa Software Incorporated (NASDAQ:COUP), Darden Restaurants, Inc. (NYSE:DRI), Live Nation Entertainment, Inc. (NYSE:LYV), and Conagra Brands, Inc. (NYSE:CAG). This group of stocks’ market valuations are similar to CFG’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
UI 19 278681 0
GIB 15 187732 0
MKTX 34 672097 0
COUP 50 3702472 -12
DRI 49 1315631 7
LYV 37 1325005 -9
CAG 30 700335 2
Average 33.4 1168850 -1.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 33.4 hedge funds with bullish positions and the average amount invested in these stocks was $1169 million. That figure was $579 million in CFG’s case. Coupa Software Incorporated (NASDAQ:COUP) is the most popular stock in this table. On the other hand CGI Inc. (NYSE:GIB) is the least popular one with only 15 bullish hedge fund positions. Citizens Financial Group Inc (NYSE:CFG) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CFG is 63.5. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately CFG wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CFG were disappointed as the stock returned 1.1% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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Disclosure: None. This article was originally published at Insider Monkey.