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Were Hedge Funds Right About Piling Into CIT Group Inc. (CIT)?

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds’ and successful investors’ positions as of the end of the first quarter. You can find articles about an individual hedge fund’s trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of CIT Group Inc. (NYSE:CIT) based on that data and determine whether they were really smart about the stock.

Is CIT Group Inc. (NYSE:CIT) the right investment to pursue these days? Hedge funds were turning bullish. The number of bullish hedge fund bets went up by 2 lately. Our calculations also showed that CIT 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).

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

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 58 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 36% through May 18th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Donald Sussman Paloma Partners

Donald Sussman of Paloma Partners

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. With all of this in mind we’re going to take a look at the key hedge fund action regarding CIT Group Inc. (NYSE:CIT).

Hedge fund activity in CIT Group Inc. (NYSE:CIT)

Heading into the second quarter of 2020, a total of 37 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the fourth quarter of 2019. On the other hand, there were a total of 25 hedge funds with a bullish position in CIT 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.

Is CIT A Good Stock To Buy?

According to Insider Monkey’s hedge fund database, First Pacific Advisors LLC, managed by Robert Rodriguez and Steven Romick, holds the biggest position in CIT Group Inc. (NYSE:CIT). First Pacific Advisors LLC has a $119 million position in the stock, comprising 1.7% of its 13F portfolio. The second largest stake is held by Lakewood Capital Management, managed by Anthony Bozza, which holds a $43.7 million position; the fund has 2% of its 13F portfolio invested in the stock. Remaining professional money managers with similar optimism include Ken Griffin’s Citadel Investment Group, Cliff Asness’s AQR Capital Management and Steve Cohen’s Point72 Asset Management. In terms of the portfolio weights assigned to each position Birch Run Capital allocated the biggest weight to CIT Group Inc. (NYSE:CIT), around 3.71% of its 13F portfolio. MSDC Management is also relatively very bullish on the stock, earmarking 3.13 percent of its 13F equity portfolio to CIT.

With a general bullishness amongst the heavyweights, key money managers have jumped into CIT Group Inc. (NYSE:CIT) headfirst. MSDC Management, managed by Marc Lisker, Glenn Fuhrman and John Phelan, established the largest position in CIT Group Inc. (NYSE:CIT). MSDC Management had $11.6 million invested in the company at the end of the quarter. Anand Parekh’s Alyeska Investment Group also made a $7.8 million investment in the stock during the quarter. The other funds with brand new CIT positions are Dmitry Balyasny’s Balyasny Asset Management, David Rosen’s Rubric Capital Management, and Jim Roumell’s Roumell Asset Management.

Let’s go over hedge fund activity in other stocks similar to CIT Group Inc. (NYSE:CIT). These stocks are YETI Holdings, Inc. (NYSE:YETI), Artisan Partners Asset Management Inc (NYSE:APAM), Fate Therapeutics Inc (NASDAQ:FATE), and Golub Capital BDC Inc (NASDAQ:GBDC). This group of stocks’ market valuations resemble CIT’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
YETI 20 57055 3
APAM 20 172187 4
FATE 24 582153 1
GBDC 13 52793 -3
Average 19.25 216047 1.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $216 million. That figure was $315 million in CIT’s case. Fate Therapeutics Inc (NASDAQ:FATE) is the most popular stock in this table. On the other hand Golub Capital BDC Inc (NASDAQ:GBDC) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks CIT Group Inc. (NYSE:CIT) 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 12.3% in 2020 through June 30th but still managed to beat the market by 15.5 percentage points. Hedge funds were also right about betting on CIT, though not to the same extent, as the stock returned 23% in Q2 and outperformed the market as well.

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