5 Financial Stocks Hedge Funds Are Buying

NEW YORK (TheStreet) -- Hedge funds continued to shed financials - mostly bank stocks- during the third quarter as mounting concerns about European debt and heightened volatility eroded conviction of the most seasoned of investors.

Appaloosa Management's David Tepper, who made a fortune from bank stocks in 2009, eliminated his position from Bank of America(BAC) and Wells Fargo(WFC) and cut back his holdings in Citigroup(C).

John Paulson, who is having a rough year, unloaded his position in JPMorgan Chase(JPM), while paring exposure to Citigroup and Wells Fargo.

Perhaps he decided it was time to cut his losses.

Overall, Citigroup saw the most selling during the quarter among financial stocks, which explains the stock's meltdown in recent months. JPMorgan and Bank of America also saw heavy selling, as did Goldman Sachs (GS)and Morgan Stanley(MS).

Wells Fargo was the only one among the big four to continue to attract some buying interest. With little exposure to Europe, the bank has withstood the volatility in the market.

Still, a look at aggregate 13F filings of hedge funds, reveals some notable buys in financial stocks, including non-bank holding companies. TheStreet parsed through Bloomberg data to see which financial stocks attracted the most hedge fund money in the third quarter. The shortlist does not include real estate investment trusts, which is also classified as financials by Bloomberg.

As always, it is worth remembering that the information in these filings are dated. Positions in the stocks listed below could have changed. Also the regulatory filings do not require institutional investors to disclose short positions, so the portfolio disclosures are incomplete.

Still, here is a glimpse of what the smart money have been betting on recently.