6 Financial Stocks Hedge Funds Are Buying Like Crazy

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 |  Includes: BAC, C, CIT, JPM, MET, WFC
by: Insider Monkey

Insider Monkey follows hedge fund managers because they're the smartest investors around. They leave less to chance than most investors. They go great lengths to get an "edge" over ordinary investors. Hedge fund managers also have the resources to do extensive research on public companies and they have access to experts who can guide them. We believe we are more likely to beat the market by imitating insiders and hedge funds than trading against them. Based on the transactions of nearly 700 hedge funds compiled by Goldman Sachs, we present the list of top six financial stocks that hedge funds are buying like crazy:

1. JP Morgan (NYSE:JPM): Forty nine hedge funds had JPM among their top 10 holdings. Hedge funds collectively own 4% of the outstanding shares. The stock returned 1.5% so far this year. Steve Heinz's Lansdowne, Jonathan Jacobson's Highfields Capital, and Andreas Halvorsen's Viking Global are among the hedge funds with huge JPM positions.

2. Citigroup (NYSE:C): Forty three hedge funds had Citigroup among their top 10 holdings. Hedge funds collectively own 6% of the outstanding shares. The stock lost 13.4% so far this year. Bill Ackman's Pershing Square had nearly $650 Million in C. However, the largest stakes belong to John Paulson and Bruce Berkowitz. Each of these two managers had more than $1 Billion in Citigroup.

3. CIT Group (NYSE:CIT): Twenty three hedge funds had CIT among their top 10 holdings. Hedge funds collectively own 24% of CIT's outstanding shares. The stock lost 7% so far this year. Marc Lasry's Avenue Capital and Bruce Berkowitz's Fairholme had large positions in CIT at the end of March.

4. Bank of America (NYSE:BAC): Twenty one hedge funds had BAC among their top 10 holdings. Hedge funds collectively own 3% of BAC's outstanding shares. The stock lost 12.3% so far this year. John Paulson and Bruce Berkowitz had the largest positions in BAC at the end of March. Eric Mindich's Eton Park and David Tepper's Appaloosa was also bullish about BAC.

5. Wells Fargo (NYSE:WFC): Sixteen hedge funds had WFC among their top 10 holdings. Hedge funds collectively own 2% of WFC's outstanding shares. The stock lost 8.7% so far this year. Warren Buffett and Steve Heinz's Lansdowne Partners had large positions in WFC at the end of March.

6. Metlife (NYSE:MET): Fourteen hedge funds had MET among their top 10 holdings. Hedge funds collectively own 4% of MET's outstanding shares. The stock lost 1.5% so far this year. Jeffrey Altman's Owl Creek, Ken Griffin's Citadel, and Glenn Russell Dubin's Highbridge Capital had large holdings in MET at the end of March.

These six stocks had an average return of -4.1% so far in 2011. Financial stocks are underperforming the market so far this year. Investors who think the decline in financial stocks will end soon should consider these six mega-cap financial stocks.

Disclosure: I am long C.