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Hedge Funds Betting More Trouble Ahead For This Sector

If you think late day buying on Monday is a sign that bulls are back, you may be in for a rude awakening.

We're hearing that hedge funds remain bearish - especially on financials.

LocateStock.com CEO John Tabacco tells us, "the dominant view among hedge funds remains that financials will be one of the weakest sectors in the marketplace."

And he should know. LocateStock.com is a company that finds stocks in the marketplace that hedge funds and high frequency traders are looking to short.

And Tabacco tells us beleaguered Citigroup may be particularly vulnerable. "(The shorts think) it looks very interesting as a downside play from here," says Tabacco.

But this isn't just a Citi story. Hedge funds are making broad bets. They think nearly all US banks are overvalued.

That concurs with comments made by Meredith Whitney on CNBC in which she said, "there's so much potentially game changing regulatory reform on deck... I would avoid financials at all costs."

Despite the bearish outlook for US banks, hedge funds feel quite differently about banks located to the north.

I’m not seeing any shorting in the Canadian banks such as Bank of Montreal and Royal Bank of Canada, adds Tabacco.

What's the bottom line?

Both Whitney and hedge funds clients of LocateStock.com suggest staying away from US banks.


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Trader disclosure: On May 17, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Terranova Owns Gold; Terranova Owns (PFE), (GLD), (TER), (YHOO), (AXP); Terranova Is Short (X), (GOOG); Adami Owns (AGU), (C), (GS), (INTC), (MSFT), (NUE), (BTU); Finerman's Firm Is Short (IJR), (IWM), (MDY), (SPY); Finerman's Firm Is Long S&P Puts; Finerman Owns (AAPL); Finerman's Firm Owns (BAC), (BAC) Leap; Finerman Owns (BAC), (BAC) Preferred; Finerman Owns (GOOG); Finerman's Firm And Finerman Own (HPQ); Finerman's Firm Owns (JPM), (JPM) Leap; Finerman Owns (JPM); Finerman's Firm Owns (TGT); Finerman Owns (WFC) Preferred; Finerman's Firm Owns (WMT); Najarian Owns (AMD) Calls; Najarian Owns (AKAM) Call Spread; Najarian Owns (C) Calls; Najarian Owns (F) Calls; Najarian Owns (GOOG) Calls; Najarian Owns (HPQ), Is Short (HPQ) Calls; Najarian Owns (MS), Is Short (MS) Calls; Najarian Owns (MCD) Call Spread; Seymour owns (INTC); Jon Najarian owns (DKS); Zach Karabell owns (ATHR); Grasso Owns (BP), (NDAQ), (DYN), (LPX), (ASTM), (ABK), (BAC), (BGP), (C), (CVGI), (JPM), (PRST), (PFE), (BA), (T), (CSCO)

For Joe Terranova
Terranova Works For (VRTS)
Terranova Is Chief Market Strategist Of Virtus Investment Partners, Ltd.
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (DRYS)

For Brian Kelly
Kanundrum Capital Owns (GFI)
Kanundrum Capital Owns (GLD)
Kanundrum Capital Owns (TLT)
Kanundrum Capital Owns (AUY)
Kanundrum Capital Is Long U.S. Dollar
Kanundrum Capital Is Short Euro
Kanundrum Capital Is Short British Pound
Kanundrum Capital Is Short Swiss Franc
Kanundrum Capital Is Short (XLK)
Kanundrum Capital Is Short (XLI)
Kanundrum Capital Is Short (XLV)
Kanundrum Capital Is Short (XLY)
Kanundrum Capital Is Short (HBC)
Kanundrum Capital Is Short (XLF)


For Steve Grasso
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
Stuart Frankel And Its Partners Are Short (AAPL)
Stuart Frankel And Its Partners Own (AMR)
Stuart Frankel And Its Partners Own (BAX)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (CUBA)
Stuart Frankel And Its Partners Own (DYN)
Stuart Frankel And Its Partners Own (GERN)
Stuart Frankel And Its Partners Own (HSPO)
Stuart Frankel And Its Partners Own (MERC)
Stuart Frankel And Its Partners Own (NWS.A)
Stuart Frankel And Its Partners Own (NYX)
Stuart Frankel And Its Partners Own (PALM)
Stuart Frankel And Its Partners Own (PDE)
Stuart Frankel And Its Partners Own (PFE)
Stuart Frankel And Its Partners Own (PRST)
Stuart Frankel And Its Partners Own (RDC)
Stuart Frankel And Its Partners Own (TLM)
Stuart Frankel And Its Partners Own (XRX)
Stuart Frankel And Its Partners Own (SDS)
Stuart Frankel And Its Partners Are Short (QQQQ)
Stuart Frankel And Its Partners Are Short (CL)
Stuart Frankel And Its Partners Are Short (AAPL)

For Daniel Amir, Lazard Capital Markets Analyst
Lazard Capital Markets LLC is a market maker in (CREE)

For Steve Cortes
Cortes Is Short Gold, Silver
Cortes Is Long Euro

For Paul Hickey
Hickey Owns (BAC)
Hickey Owns (C)

For Ananda Baruah
Brean Murray, Carret & Co. Is A Market Maker In (DELL)

Other Relevant Disclosures:
Terranova Owned (YHOO) On 4/8/10



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