Were Hedge Funds Right About Citigroup Inc. (C)?

The Insider Monkey team has completed processing the quarterly 13F filings for the June quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors experienced strong gains on the back of a strong market performance, which certainly propelled them to adjust their equity holdings so as to maintain the desired risk profile. As a result, the relevancy of these public filings and their content is indisputable, as they may reveal numerous high-potential stocks. The following article will discuss the smart money sentiment towards Citigroup Inc. (NYSE:C).

Citigroup Inc. (NYSE:C) shareholders have witnessed a decrease in activity from the world’s largest hedge funds of late. Citigroup Inc. (NYSE:C) was in 87 hedge funds’ portfolios at the end of June. The all time high for this statistic is 121. Our calculations also showed that C isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

To most stock holders, hedge funds are viewed as slow, outdated financial tools of yesteryear. While there are over 8000 funds trading at present, We choose to focus on the elite of this group, about 850 funds. These investment experts administer the lion’s share of all hedge funds’ total asset base, and by observing their best investments, Insider Monkey has discovered a few investment strategies that have historically beaten Mr. Market. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Also, our monthly newsletter’s portfolio of long stock picks returned 185.4% since March 2017 (through August 2021) and beat the S&P 500 Index by more than 79 percentage points. You can download a sample issue of this newsletter on our website.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. Keeping this in mind we’re going to take a gander at the latest hedge fund action regarding Citigroup Inc. (NYSE:C).

Do Hedge Funds Think C Is A Good Stock To Buy Now?

At Q2’s end, a total of 87 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the previous quarter. By comparison, 96 hedge funds held shares or bullish call options in C a year ago. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Citigroup Inc. (NYSE:C) was held by ValueAct Capital, which reported holding $1467.8 million worth of stock at the end of June. It was followed by Eagle Capital Management with a $1451.6 million position. Other investors bullish on the company included Pzena Investment Management, Citadel Investment Group, and Two Sigma Advisors. In terms of the portfolio weights assigned to each position ValueAct Capital allocated the biggest weight to Citigroup Inc. (NYSE:C), around 17.55% of its 13F portfolio. Kahn Brothers is also relatively very bullish on the stock, earmarking 8.48 percent of its 13F equity portfolio to C.

Due to the fact that Citigroup Inc. (NYSE:C) has witnessed falling interest from the aggregate hedge fund industry, it’s safe to say that there lies a certain “tier” of funds that slashed their positions entirely last quarter. Intriguingly, Stanley Druckenmiller’s Duquesne Capital sold off the largest position of the 750 funds followed by Insider Monkey, valued at close to $154.6 million in stock. Richard Oldfield’s fund, Oldfield Partners, also dumped its stock, about $113.3 million worth. These bearish behaviors are important to note, as aggregate hedge fund interest was cut by 3 funds last quarter.

Let’s now review hedge fund activity in other stocks similar to Citigroup Inc. (NYSE:C). These stocks are Union Pacific Corporation (NYSE:UNP), Royal Bank of Canada (NYSE:RY), Sea Limited (NYSE:SE), NextEra Energy, Inc. (NYSE:NEE), Anheuser-Busch InBev SA/NV (NYSE:BUD), The Boeing Company (NYSE:BA), and Amgen, Inc. (NASDAQ:AMGN). This group of stocks’ market values are closest to C’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 54.3 hedge funds with bullish positions and the average amount invested in these stocks was $3585 million. That figure was $6155 million in C’s case. Sea Limited (NYSE:SE) 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 18 bullish hedge fund positions. Citigroup Inc. (NYSE:C) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for C is 63.7. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately C wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on C were disappointed as the stock returned -0.8% since the end of June (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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