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

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With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the second quarter of 2021. One of these stocks was Citigroup Inc. (NYSE:C).

Citigroup Inc. (NYSE:C) was in 90 hedge funds' portfolios at the end of March. The all time high for this statistic is 121. C investors should be aware of a decrease in activity from the world's largest hedge funds of late. There were 95 hedge funds in our database with C holdings at the end of December. Our calculations still showed that C ranked #29 among the 30 most popular stocks among hedge funds (click for Q1 rankings).

Today there are a lot of signals stock market investors can use to appraise their stock investments. A couple of the less utilized signals are hedge fund and insider trading activity. Our researchers have shown that, historically, those who follow the best picks of the best hedge fund managers can trounce the broader indices by a superb amount (see the details here). Also, our monthly newsletter's portfolio of long stock picks returned 206.8% since March 2017 (through May 2021) and beat the S&P 500 Index by more than 115 percentage points. You can download a sample issue of this newsletter on our website .


Jeffrey Ubben of ValueAct Capital

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium 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. Now let's review the recent hedge fund action regarding Citigroup Inc. (NYSE:C).

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

At first quarter's end, a total of 90 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -5% from the fourth quarter of 2020. Below, you can check out the change in hedge fund sentiment towards C over the last 23 quarters. With the smart money's capital changing hands, there exists a few key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

Is C A Good Stock To Buy?
Is C A Good Stock To Buy?

Among these funds, ValueAct Capital held the most valuable stake in Citigroup Inc. (NYSE:C), which was worth $1580.4 million at the end of the fourth quarter. On the second spot was Eagle Capital Management which amassed $1508.4 million worth of shares. Pzena Investment Management, First Pacific Advisors LLC, and Citadel Investment Group 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 ValueAct Capital allocated the biggest weight to Citigroup Inc. (NYSE:C), around 18.44% of its 13F portfolio. Oldfield Partners is also relatively very bullish on the stock, designating 11.74 percent of its 13F equity portfolio to C.

Since Citigroup Inc. (NYSE:C) has experienced bearish sentiment from the smart money, logic holds that there were a few fund managers that elected to cut their full holdings in the first quarter. Intriguingly, Edgar Wachenheim's Greenhaven Associates dumped the biggest investment of the 750 funds tracked by Insider Monkey, comprising about $286.7 million in stock. Suzi Nutton (CEO)'s fund, Lansdowne Partners, also said goodbye to its stock, about $73.5 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest fell by 5 funds in the first quarter.

Let's check out hedge fund activity in other stocks similar to Citigroup Inc. (NYSE:C). These stocks are Royal Dutch Shell plc (NYSE:RDS), Honeywell International Inc. (NYSE:HON), QUALCOMM, Incorporated (NASDAQ:QCOM), The Boeing Company (NYSE:BA), NextEra Energy, Inc. (NYSE:NEE), United Parcel Service, Inc. (NYSE:UPS), and Union Pacific Corporation (NYSE:UNP). This group of stocks' market values are similar to C's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RDS,36,2190186,2 HON,56,1731346,11 QCOM,73,2765985,-12 BA,59,1437584,4 NEE,63,2725995,2 UPS,44,1346598,-4 UNP,75,4685045,7 Average,58,2411820,1.4 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 58 hedge funds with bullish positions and the average amount invested in these stocks was $2412 million. That figure was $6938 million in C's case. Union Pacific Corporation (NYSE:UNP) is the most popular stock in this table. On the other hand Royal Dutch Shell plc (NYSE:RDS) is the least popular one with only 36 bullish hedge fund positions. Compared to these stocks Citigroup Inc. (NYSE:C) is more popular among hedge funds. Our overall hedge fund sentiment score for C is 72.3. 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 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 25.8% in 2021 through August 6th and still beat the market by 6.7 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 -0.9% since the end of the first quarter (through 8/6) 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 most of these stocks already outperformed the market since 2019.

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