Should You Join Billionaire Ken Griffin’s Citadel In PNC Financial Services (PNC)?

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Several weeks after the end of each quarter, hedge funds and other notable investors file 13Fs with the SEC to disclose many of their long equity positions in U.S. stocks as of the end of the previous quarter. We track these filings as a source of information to help us develop investing strategies (for example, we have found that the most popular small cap stocks among hedge funds generate an average excess return of 18 percentage points per year) and also because we think that comparing filings over time can help provide initial investment ideas. Top managers’ market moves shouldn’t necessarily be imitated, but it can be useful to see how they are approaching the markets and investors can certainly further research any ideas which seem interesting. When we reviewed the most recent 13F from billionaire Ken Griffin’s Citadel Investment Group, we noticed that the fund had more than tripled its holdings of PNC Financial Services (NYSE:PNC) during the first quarter of the year, to a total of 3.7 million shares. See more of Griffin’s stock picks.


PNC Financial Services (NYSE:PNC) is a $38 billion market cap retail and commercial bank, which also owns a large stake in asset manager BlackRock. In the first quarter of 2013, its net income grew by over 25% versus a year earlier; however, this improved financial performance was primarily due to secondary business activities such as BlackRock. The retail banking unit experienced a decline in segment income, and while the largest division of PNC Financial Services (NYSE:PNC)- corporate and institutional banking- recorded higher income compared to Q1 2012 this figure was down on a q/q basis. As a result we wouldn’t take the headline figure on the bottom line as an indicator that high growth is likely going forward.

Currently PNC Financial Services (NYSE:PNC) trades right about at the book value of its equity, and a valuation equal to 13 times its trailing earnings. While arguably low in absolute terms, that P/E multiple isn’t that cheap for a bank and we don’t have much confidence in the business improving over the next couple years. Citadel had been the largest shareholder of PNC Financial Services (NYSE:PNC) at the end of Q1 out of the filers we track; Ric Dillon’s Diamond Hill Capital had also liked the stock, reporting a position of 2.5 million shares (find Dillon’s favorite stocks).

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