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Was The Smart Money Right About Citizens Financial Group Inc (CFG)?

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Asma UL Husna
·6 min read
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At the end of February we announced the arrival of the first US recession since 2009 and we predicted that the market will decline by at least 20% in (Recession is Imminent: We Need A Travel Ban NOW). In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. In this article, we will take a closer look at hedge fund sentiment towards Citizens Financial Group Inc (NYSE:CFG).

Is Citizens Financial Group Inc (NYSE:CFG) ready to rally soon? Money managers were getting more optimistic. The number of long hedge fund positions advanced by 1 lately. Citizens Financial Group Inc (NYSE:CFG) was in 47 hedge funds' portfolios at the end of June. The all time high for this statistics is 67. Our calculations also showed that CFG isn't among the 30 most popular stocks among hedge funds (click for Q2 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 56 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 34% through August 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Dmitry Balyasny of Balyasny Asset Managemnet
Dmitry Balyasny of Balyasny Asset Managemnet

Dmitry Balyasny of Balyasny Asset Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 best artificial intelligence stocks to pick the best growth stocks to buy. 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 website to get excerpts of these letters in your inbox. With all of this in mind we're going to take a peek at the fresh hedge fund action regarding Citizens Financial Group Inc (NYSE:CFG).

Hedge fund activity in Citizens Financial Group Inc (NYSE:CFG)

At Q2's end, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 2% from the first quarter of 2020. The graph below displays the number of hedge funds with bullish position in CFG over the last 20 quarters. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Arrowstreet Capital held the most valuable stake in Citizens Financial Group Inc (NYSE:CFG), which was worth $133.1 million at the end of the third quarter. On the second spot was Eminence Capital which amassed $114.5 million worth of shares. Citadel Investment Group, Adage Capital Management, and D E Shaw were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Castine Capital Management allocated the biggest weight to Citizens Financial Group Inc (NYSE:CFG), around 9.05% of its 13F portfolio. Soapstone Capital is also relatively very bullish on the stock, setting aside 6.91 percent of its 13F equity portfolio to CFG.

As one would reasonably expect, key money managers have jumped into Citizens Financial Group Inc (NYSE:CFG) headfirst. Kettle Hill Capital Management, managed by Andrew Kurita, established the most outsized position in Citizens Financial Group Inc (NYSE:CFG). Kettle Hill Capital Management had $12.5 million invested in the company at the end of the quarter. Jed Nussdorf's Soapstone Capital also initiated a $12 million position during the quarter. The following funds were also among the new CFG investors: Brandon Haley's Holocene Advisors, Sander Gerber's Hudson Bay Capital Management, and Dmitry Balyasny's Balyasny Asset Management.

Let's now review hedge fund activity in other stocks similar to Citizens Financial Group Inc (NYSE:CFG). We will take a look at StoneCo Ltd. (NASDAQ:STNE), United Rentals, Inc. (NYSE:URI), Booz Allen Hamilton Holding Corporation (NYSE:BAH), Cable One Inc (NYSE:CABO), Regions Financial Corporation (NYSE:RF), Credicorp Ltd. (NYSE:BAP), and C.H. Robinson Worldwide, Inc. (NASDAQ:CHRW). All of these stocks' market caps are closest to CFG's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position STNE,35,1342781,1 URI,40,889794,-3 BAH,25,219237,-2 CABO,24,684886,1 RF,26,191710,-11 BAP,20,174521,-2 CHRW,28,441588,-4 Average,28.3,563502,-2.9 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 28.3 hedge funds with bullish positions and the average amount invested in these stocks was $564 million. That figure was $841 million in CFG's case. United Rentals, Inc. (NYSE:URI) is the most popular stock in this table. On the other hand Credicorp Ltd. (NYSE:BAP) is the least popular one with only 20 bullish hedge fund positions. Compared to these stocks Citizens Financial Group Inc (NYSE:CFG) is more popular among hedge funds. Our overall hedge fund sentiment score for CFG is 77. 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. 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 returned 30% in 2020 through October 23rd but still managed to beat the market by 21 percentage points. Hedge funds were also right about betting on CFG as the stock returned 17.3% since the end of June (through 10/23) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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