Amid an overall market correction, many stocks that smart money investors were collectively bullish on tanked during the third quarter. Among them, Valeant and Micron ranked among the top 30 picks and both lost around 20%. Citigroup, which was the third most popular stock, lost 10% amid uncertainty regarding the interest rates. Nevertheless, our research shows that most of the stocks that smart money likes historically generate strong risk-adjusted returns. This is why following the smart money sentiment is a useful tool for identifying the next stock to invest in.
Citizens Financial Group Inc (NYSE:CFG) was in 56 hedge funds’ portfolios at the end of the third quarter of 2015. CFG has seen an increase in hedge fund interest lately. There were 38 hedge funds in our database with CFG holdings at the end of the previous quarter. That completely reverses the opposite trend witnessed in the quarter prior to that, which was itself a big flip from the first quarter. At the end of this article we will also compare CFG to other stocks including Genuine Parts Company (NYSE:GPC), Verisk Analytics, Inc. (NASDAQ:VRSK), and Enersis S.A. (ADR) (NYSE:ENI) to get a better sense of its popularity.
To most traders, hedge funds are viewed as worthless, old investment vehicles of the past. While there are more than 8,000 funds in operation today, our researchers choose to focus on the leaders of this group, about 700 funds. It is estimated that this group of investors oversee the majority of the hedge fund industry’s total capital, and by tailing their finest stock picks, Insider Monkey has uncovered a number of investment strategies that have historically outpaced the market. Insider Monkey’s small-cap hedge fund strategy surpassed the S&P 500 index by 12 percentage points per year for a decade in their back tests.
Now, let’s go over the fresh action surrounding Citizens Financial Group Inc (NYSE:CFG).
What have hedge funds been doing with Citizens Financial Group Inc (NYSE:CFG)?
At Q3’s end, a total of 56 of the hedge funds tracked by Insider Monkey held long positions in this stock, a 47% leap from one quarter earlier. With hedge funds’ sentiment swirling, there exists a few notable hedge fund managers who were increasing their holdings significantly (or had already accumulated large positions).
When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the biggest position in Citizens Financial Group Inc (NYSE:CFG). Citadel Investment Group has a $254.2 million position in the stock, comprising 0.2% of its 13F portfolio. The second-largest stake is held by SAB Capital Management, led by Brian Jackelow, holding a $105 million position; the fund has 15.2% of its 13F portfolio invested in the stock. Remaining hedge funds and institutional investors that are bullish comprise Anthony Bozza’s Lakewood Capital Management, Phill Gross and Robert Atchinson’s Adage Capital Management, and Israel Englander’s Millennium Management.
Now, key hedge funds were breaking ground themselves. Citadel Investment Group established the most valuable position in Citizens Financial Group Inc (NYSE:CFG). SAB Capital Management, Adage Capital Management, Curtis Macnguyen’s Ivory Capital (Investment Mgmt), and Anand Parekh’s Alyeska Investment Group were some of the other funds with new CFG positions.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Citizens Financial Group Inc (NYSE:CFG) but similarly valued. These stocks are Genuine Parts Company (NYSE:GPC), Verisk Analytics, Inc. (NASDAQ:VRSK), Enersis S.A. (ADR) (NYSE:ENI), and Universal Health Services, Inc. (NYSE:UHS). This group of stocks’ market valuations are closest to CFG’s market valuation.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $566 million. That figure was $1.55 billion in CFG’s case. Universal Health Services, Inc. (NYSE:UHS) is the most popular stock in this table. On the other hand Enersis S.A. (ADR) (NYSE:ENI) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks Citizens Financial Group Inc (NYSE:CFG) is more popular among hedge funds. Considering that hedge funds are very fond of this stock in relation to its market cap peers and that their sentiment for it is soaring again, it may be a good idea to analyze it in detail and potentially include it in your portfolio.