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Hedge Funds Accelerated Their Citigroup Inc. (C) Exit During The Market Crash

At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Citigroup Inc. (NYSE:C).

How did hedge funds trade Citigroup Inc. (NYSE:C) during the stock market crash in March? Prominent investors actually continued to reduce their bets on the stock. The number of bullish hedge fund positions retreated by 12 recently. Our calculations also showed that C isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks). C was in 86 hedge funds’ portfolios at the end of the first quarter of 2020. There were 98 hedge funds in our database with C positions at the end of the previous quarter.


Video: Watch our video about the top 5 most popular hedge fund stocks.

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 72% since March 2017 and outperformed the S&P 500 ETFs by more than 44 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

Jeff Ubben VALUEACT CAPITAL

Jeffrey Ubben of ValueAct Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea.  For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We believe electric vehicles and energy storage are set to become giant markets, and we want to take advantage of the declining lithium prices amid the COVID-19 pandemic. So we asked astrophysicist Neil deGrasse Tyson about Tesla, Elon Musk, and his top stock picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind let’s view the key hedge fund action encompassing Citigroup Inc. (NYSE:C).

What does smart money think about Citigroup Inc. (NYSE:C)?

At Q1’s end, a total of 86 of the hedge funds tracked by Insider Monkey were long this stock, a change of -12% from the previous quarter. Below, you can check out the change in hedge fund sentiment towards C over the last 18 quarters. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is C A Good Stock To Buy?

According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Jeffrey Ubben’s ValueAct Capital has the number one position in Citigroup Inc. (NYSE:C), worth close to $1.1383 billion, amounting to 16.3% of its total 13F portfolio. The second most bullish fund manager is Eagle Capital Management, led by Boykin Curry, holding a $1.1096 billion position; the fund has 4.6% of its 13F portfolio invested in the stock. Some other professional money managers that hold long positions comprise Ric Dillon’s Diamond Hill Capital, D. E. Shaw’s D E Shaw and Edgar Wachenheim’s Greenhaven Associates. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to Citigroup Inc. (NYSE:C), around 16.35% of its 13F portfolio. Greenhaven Associates is also relatively very bullish on the stock, earmarking 13.26 percent of its 13F equity portfolio to C.

Since Citigroup Inc. (NYSE:C) has faced declining sentiment from the aggregate hedge fund industry, logic holds that there is a sect of funds who were dropping their entire stakes heading into Q4. It’s worth mentioning that Rajiv Jain’s GQG Partners dumped the largest stake of all the hedgies followed by Insider Monkey, comprising about $671.5 million in stock, and Robert Pitts’s Steadfast Capital Management was right behind this move, as the fund cut about $386.2 million worth. These moves are intriguing to say the least, as aggregate hedge fund interest was cut by 12 funds heading into Q4.

Let’s also examine hedge fund activity in other stocks similar to Citigroup Inc. (NYSE:C). These stocks are Royal Bank of Canada (NYSE:RY), Anheuser-Busch InBev SA/NV (NYSE:BUD), The Boeing Company (NYSE:BA), and BP plc (NYSE:BP). This group of stocks’ market caps are similar to C’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
RY 16 138801 -4
BUD 17 877182 -6
BA 54 877378 -28
BP 31 877653 -9
Average 29.5 692754 -11.75

View table here if you experience formatting issues.

As you can see these stocks had an average of 29.5 hedge funds with bullish positions and the average amount invested in these stocks was $693 million. That figure was $5494 million in C’s case. The Boeing Company (NYSE:BA) is the most popular stock in this table. On the other hand Royal Bank of Canada (NYSE:RY) is the least popular one with only 16 bullish hedge fund positions. Compared to these stocks Citigroup Inc. (NYSE:C) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately C wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on C were disappointed as the stock returned 5.8% during the second quarter (through May 22nd) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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