Should You Buy Citizens Financial Group Inc (CFG)?

Asma UL Husna

Sun, Mar 31, 2019, 6:48 PM

The Insider Monkey team has completed processing the quarterly 13F filings for the December quarter submitted by the hedge funds and other money managers included in our extensive database. Most hedge fund investors endured a torrid quarter, 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 Citizens Financial Group Inc (NYSE:CFG).

Citizens Financial Group Inc (NYSE:CFG) investors should pay attention to an increase in enthusiasm from smart money lately. CFG was in 43 hedge funds' portfolios at the end of December. There were 42 hedge funds in our database with CFG positions at the end of the previous quarter. Our calculations also showed that CFG isn't among the 30 most popular stocks among hedge funds.

Hedge funds' reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn't keep up with the unhedged returns of the market indices. Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter.

We're going to take a glance at the fresh hedge fund action encompassing Citizens Financial Group Inc (NYSE:CFG).

How are hedge funds trading Citizens Financial Group Inc (NYSE:CFG)?

At Q4's end, a total of 43 of the hedge funds tracked by Insider Monkey were long this stock, a change of 2% from one quarter earlier. By comparison, 45 hedge funds held shares or bullish call options in CFG a year ago. With hedge funds' sentiment swirling, there exists a select group of noteworthy hedge fund managers who were adding to their stakes considerably (or already accumulated large positions).

When looking at the institutional investors followed by Insider Monkey, Citadel Investment Group, managed by Ken Griffin, holds the largest position in Citizens Financial Group Inc (NYSE:CFG). Citadel Investment Group has a $369.6 million position in the stock, comprising 0.2% of its 13F portfolio. The second largest stake is held by Arrowstreet Capital, led by Peter Rathjens, Bruce Clarke and John Campbell, holding a $139.8 million position; the fund has 0.4% of its 13F portfolio invested in the stock. Other peers with similar optimism consist of Israel Englander's Millennium Management, John Overdeck and David Siegel's Two Sigma Advisors and Clint Carlson's Carlson Capital.

Now, key money managers were breaking ground themselves. Renaissance Technologies, managed by Jim Simons, assembled the biggest position in Citizens Financial Group Inc (NYSE:CFG). Renaissance Technologies had $42.6 million invested in the company at the end of the quarter. Matthew Tewksbury's Stevens Capital Management also made a $10.2 million investment in the stock during the quarter. The other funds with new positions in the stock are Dmitry Balyasny's Balyasny Asset Management, Gregg Moskowitz's Interval Partners, and Matthew Hulsizer's PEAK6 Capital Management.

Let's also examine hedge fund activity in other stocks similar to Citizens Financial Group Inc (NYSE:CFG). These stocks are Regions Financial Corporation (NYSE:RF), WPP plc (NYSE:WPP), Citrix Systems, Inc. (NASDAQ:CTXS), and Ryanair Holdings plc (NASDAQ:RYAAY). This group of stocks' market valuations match CFG's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position RF,42,674539,11 WPP,11,53798,3 CTXS,36,1995428,-1 RYAAY,9,285173,-4 Average,24.5,752235,2.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 24.5 hedge funds with bullish positions and the average amount invested in these stocks was $752 million. That figure was $1364 million in CFG's case. Regions Financial Corporation (NYSE:RF) is the most popular stock in this table. On the other hand Ryanair Holdings plc (NASDAQ:RYAAY) is the least popular one with only 9 bullish hedge fund positions. Compared to these stocks Citizens Financial Group Inc (NYSE:CFG) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Hedge funds were also right about betting on CFG as the stock returned 21.8% and outperformed the market as well.

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

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