Five Stocks That Have Burned Hedge Funds This Year

#3 Citigroup Inc (NYSE:C)

 – Investors with Long Positions (as of December 31): 106

 – Aggregate Value of Investors’ Holdings (as of December 31): $9.97 billion

Citigroup Inc (NYSE:C) recently made its 3-year low at $34.52 and though its shares have recovered somewhat since then, they are still trading down by 16.6% year-to-date. Ownership of the investment bank among hedge funds in our database saw a notable decline of 16 during the fourth quarter, though it still ranked as the 12th-most popular stock among hedge funds at the end of December. With ownership of over 102 million shares of the company, Seth Klarman‘s Baupost Group continued to remain its largest shareholder in our system.  According to recent reports, shareholders of JPMorgan (NYSE:JPM) and Citigroup (NYSE:C) will get to vote later this year on potential breakups of the banks. Citigroup currently faces a $792.4 million tax claim from German authorities, who allege that its German subsidiary used a legal loophole to save taxes on dividend-stripping deals. For its fiscal year 2016 first quarter, analysts expect Citigroup to report EPS of $1.19 on revenue of $17.87 billion. For the same quarter of the previous financial year, the bank reported EPS of $1.52 on revenue of $19.70 billion.

#2 Bank of America Corp (NYSE:BAC)

 – Investors with Long Positions (as of December 31): 113

 – Aggregate Value of Investors’ Holdings (as of December 31): $6.80 billion

Amid a 5.4% rise in Bank of America Corp (NYSE:BAC)’s stock during the fourth quarter, the number of funds that we track with long positions in the stock rose by five and the aggregate value of their holdings in it jumped up by $353 million. Billionaire Daniel S. Och‘s OZ Management more than doubled its stake in the bank during that period to nearly 26.75 million shares. Like its peer Citigroup, Bank of America Corp (NYSE:BAC) has also slumped heavily this year, as it currently trades down by almost 19% year-to-date. Due to this decline, the bank now trades at a forward P/E of 8.54 and an abysmally low price-to-book multiple of 0.61. Analysts feel that investors are fearing an earnings decline at the bank overly much and that has made the stock really cheap. On March 18, the bank announced that its board authorized increasing its common stock repurchase plan by up to $800 million, which is in addition to the $4 billion that it had previously authorized.

#1 Valeant Pharmaceuticals Intl Inc (NYSE:VRX)

 – Investors with Long Positions (as of December 31): 83

 – Aggregate Value of Investors’ Holdings (as of December 31): $12.55 billion

Without a doubt, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) is the stock that has burned hedge funds the worst this year. Though shares of the company started their steep downward journey in August of last year, Valeant Pharmaceuticals Intl Inc (NYSE:VRX) was still a very popular stock among hedge funds heading into 2016. During the fourth quarter, when its stock tumbled by over 40%, only five funds covered in our system sold off their holdings in the company. Despite losing a lot of money in Valeant, activist investor Bill Ackman‘s Pershing Square revealed in a regulatory filing that it now owns 9% of the company (including options). Mr. Ackman released a note to his investors last week, in which he wrote, “We continue to believe that the value of the underlying business franchises that comprise Valeant are worth multiples of the current market price”. Shares of Valeant are trading down by over 70% year-to-date, with more than half of those losses coming last week after the company issued dismal earnings and revenue guidance and warned investors about a potential debt default. On March 22, the company announced that CEO Michael Pearson will step aside, and that Mr. Ackman will join the company’s board.

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