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We follow hedge fund managers because they're the smartest investors around. They leave less to chance than do most investors. They go to 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 350 hedge funds compiled by us, we present the list of the top 13 financial stocks that hedge funds are buying like crazy:

1. Citigroup (C): More hedge funds - in fact, 90 - owned Citigroup than any other financial stock last quarter. Collectively, hedge funds owned 9% of the total outstanding C stock. Citigroup was also the most popular stock among hedge funds at the end of March.

Unfortunately several hedge funds dumped their positions in the stock but C still ranks third. Hedge funds still invested more in C than in AAPL. This is mainly due to the large positions by John Paulson and Bruce Berkowitz (click here to see Bruce Berkowitz’s top picks). During the second quarter Bill Ackman also added to his already large bets and brought his total position in the company to $979 Million at the end of June. The stock lost 37% since then.

2. JPMorgan Chase (JPM): Eighty five hedge funds owned JPM in the same time period. That's not far behind C, so it's possible the two may be on equal footing in the hedge fund world. Hedge funds own about 4% of JPM shares. JPM fares better than C, but is still down overall, by losing 17% year to date. Hedge funds had $7 Billion in JPM at the end of March. Steve Heinz’s Lansdowne, Jonathan Jacobson’s Highfields Capital, and Andreas Halvorsen’s Viking Global are among the hedge funds with huge JPM positions.

3. Bank of America (BAC): Seventy-seven hedge funds owned this stock in Q2, making their total interest in Bank of America at about 5% of the company's outstanding shares. BAC to went down year to date, losing more than half its value. Bank of America is down 53% since the beginning of the year. Bruce Berkowitz's Fairholme is the big player here. As of the end of June, they had nearly a billion dollars worth of shares.

4. Wells Fargo (WFC): Sixty-one hedge funds owned Wells Fargo last quarter. In total, their interest came to 9% of the company's outstanding shares. Wells Fargo also couldn't hold it together this year, as it's down 22% year to date. Warren Buffett has nearly $10 Billion vested with Wells Fargo. He increased his position by 3% last quarter. He is probably adding to his position right now.

5. Goldman Sachs (GS): The company headed by newly legally-represented Lloyd Blankfein was owned by 58 hedge funds last quarter. That comes out to about 4% of the company's outstanding shares. Actually, GS is not having a good year either, losing more than a third of its value. GS is down 36% year to date. Highfields Capital Management initiated a $72 Million position in GS last quarter.

6. MetLife (MET): Another member in the losers pack, MetLife saw its value plummet 29% in 2011. Fifty hedge funds own the stock, together making their interest in the company at around 7% of total outstanding shares. Larry Robbins' Glenview Capital doubled down on his interest in his MET shares last quarter. He now has 1.4 Million shares.

7. CIT Group (CIT): This seems to be a big favorite among hedge funds. Although only about half the number of Citigroup owners own CIT group - 50, to be exact - their accumulative interest in the stock is 36%. They own half of all outstanding shares. But CIT went down as well this year. It's down 34% year to date. Dan Loeb nearly doubled his interest last quarter. Third Point now has 3 million shares of CIT.

8. American Express (AXP): The singleton on the other side of the fence, American Express saw a gain of 9% so far this year. Forty hedge funds own the stock. Combined, they own 16% of all outstanding shares. Warren Buffett is far and away the biggest guy in the game. Their 151 million share interest stayed the same last quarter.

9. U.S. Bancorp (USB): Thirty-nine hedge funds owned USB last quarter. Collectively, their interest amounts to about 7% of USB's total outstanding shares. USB has so far lost 19% this year. U.S. Bancorp provides various banking and financial services in the United States. The stock has a market cap of $45.7 billion and P/E ratio of 11.35. Warren Buffett had $1.8 billion invested in USB shares (click here to see Warren Buffett’s top holdings).

10. American Intl. Grp (AIG): Thirty five hedge funds owned AIG in Q2 2011. And their collective interest of 7% in the total outstanding share plummeted so far this year. AIG lost 53% year to date. Fairholme has more than 12 times the next big owner, with 103 million shares of AIG.

11. Aon Corp. (AON): Thirty five funds had Aon in their portfolios last quarter. It seems to be a pretty popular pick among the funds, considering hedge funds own more than 20% of all outstanding shares. Aon is sitting on the fence in terms of returns; it has so far lost 1% this year. Glenview, Citadel and Highside are all funds with large interests in AIG (click here to see billionaire Ken Griffin’s top stock picks).

12. Morgan Stanley (MS): Thirty-five funds had MS at the end of last quarter. Their combined ownership, which amounts to about 6% of all outstanding shares, lost value so far this year. MS has gone down 42% year to date. Andreas Halvorsen's Viking Global initiated a $140 Million position in MS last quarter.

13. MGIC Investment (MTG): And the biggest loser of them all. Thirty-four hedge funds had MTG in Q2. Collectively, they own more than a quarter of all outstanding shares. And that investment lost a whopping 83% so far this year. Leon Cooperman's Omega Advisors decreased its interest in MTG by 41% last quarter. Its remaining stake is about 5 million shares.

Source: 13 Most Popular Financial Stocks Held By Hedge Funds