It is important for a retail investor to be wary of companies that are losing considerable favor with smart money investors, which likely signals a fundamental shift in the valuation, growth prospects, or performance of the company or its sector. While some hedge funds are known for a contrarian brand of investing, which involves betting against the general market perception in stocks, an everyday investor doesn’t have the expertise or the resources to play the market this way. Hence, based on the latest round of 13F filings, we have formulated a list of stocks that suffered a major loss of support during the first quarter from the funds tracked by Insider Monkey, which investors of these stocks should consider.
Today there are dozens of tools investors can use to grade their holdings. A duo of the most under-the-radar tools are hedge fund and insider trading sentiment. Our researchers have shown that, historically, those who follow the top picks of the elite fund managers can trounce their index-focused peers by a very impressive margin (see the details here).
5. Citizens Financial Group Inc (NYSE:CFG)
– Investors with Long Positions (as of March 31): 51
– Aggregate Value of Investors’ Holdings (as of March 31): $1.25 Billion
The number of hedge funds bullish on the $12.61 billion retail bank holding company dropped by 16 during the first three months of the year. This continues a trend of extreme volatility being seen in this stock, in terms of its hedge fund ownership, which has fluctuated wildly up and down during several recent quarters. Even though Citizens Financial Group Inc (NYSE:CFG)’s first quarter earnings of $0.41 per share beat the consensus estimate by $0.02 and its revenue of $1.23 billion was in-line with expectations, the stock is down by a significant 10% on a year-to-date basis. Cliff Asness‘ AQR Capital Management cut its stake in Citizens Financial Group Inc (NYSE:CFG) by 21% to 6.02 million shares during the first quarter.
4. eBay Inc (NASDAQ:EBAY)
– Investors with Long Positions (as of March 31): 57
– Aggregate Value of Investors’ Holdings (as of March 31): $2.0 Billion
The number of hedgies holding eBay Inc (NASDAQ:EBAY) in their portfolios among those in our database also dropped by 16 during the March quarter. The stock has come under slightly greater selling pressure than Citizens Financial this year, losing about 11.5% of its value, partly due to both Barclays and Morgan Stanley recently downgrading the e-commerce company to ‘Underweight’ from ‘Equal-weight’. Renowned activist investor Dan Loeb of Third Point sold out his fund’s stake in eBay Inc (NASDAQ:EBAY) during the first quarter, which consisted of 4 million shares at the end of 2015.
On the next page we’ll discuss three more stocks that were vacated in droves by top hedge funds in the first quarter.