Centene Corp (CNC): Smart Money Ownership Crumbles by 53% in 2 Quarters

Legendary investors such as Leon Cooperman and Seth Klarman earn enormous amounts of money for themselves and their investors by doing in-depth research on small-cap stocks that big brokerage houses don’t publish. Small cap stocks -especially when they are screened well- can generate substantial outperformance versus a boring index fund. That’s why we analyze the activity of those elite funds in these small-cap stocks. In the following paragraphs, we analyze Centene Corp (NYSE:CNC) from the perspective of those elite funds.

Is Centene Corp (NYSE:CNC) a great stock to buy now? The smart money is selling. The number of bullish hedge fund positions went down by 10 lately. CNC was in 22 hedge funds’ portfolios at the end of the third quarter of 2016. There were 32 hedge funds in our database with CNC holdings at the end of the previous quarter. At the end of this article we will also compare CNC to other stocks including Tractor Supply Company (NASDAQ:TSCO), Autodesk, Inc. (NASDAQ:ADSK), and Host Hotels and Resorts Inc (NYSE:HST) to get a better sense of its popularity.

At Insider Monkey, we’ve developed an investment strategy that has delivered market-beating returns over the past 12 months. Our strategy identifies the 100 best-performing funds of the previous quarter from among the collection of 700+ successful funds that we track in our database, which we accomplish using our returns methodology. We then study the portfolios of those 100 funds using the latest 13F data to uncover the 30 most popular mid-cap stocks (market caps of between $1 billion and $10 billion) among them to hold until the next filing period. This strategy delivered 18% gains over the past 12 months, more than doubling the 8% returns enjoyed by the S&P 500 ETFs.

Hedge fund activity in Centene Corp (NYSE:CNC)

At Q3’s end, a total of 22 of the hedge funds tracked by Insider Monkey were bullish on this stock, a 31% tumble from one quarter earlier, with smart money holdings falling by over 53% in the past 2 quarters. With the smart money’s positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings considerably (or already accumulated large positions).

According to Insider Monkey’s hedge fund database, Andreas Halvorsen’s Viking Global has the largest position in Centene Corp (NYSE:CNC), worth close to $54.7 million. Coming in second is GMT Capital, managed by Thomas E. Claugus, which holds a $50.4 million position; 1% of its 13F portfolio is allocated to the stock. Some other professional money managers that are bullish consist of Jeremy Green’s Redmile Group, Phill Gross and Robert Atchinson’s Adage Capital Management and Roberto Mignone’s Bridger Management.

Due to the fact that Centene Corp (NYSE:CNC) has faced a decline in interest from the entirety of the hedge funds we track, it’s easy to see that there is a sect of fund managers who were dropping their full holdings by the end of the third quarter. Intriguingly, Alok Agrawal’s Bloom Tree Partners said goodbye to the biggest investment of all the hedgies monitored by Insider Monkey, valued at an estimated $21.6 million in stock, and Steve Cohen’s Point72 Asset Management was right behind this move, as the fund dumped about $14.5 million worth of shares. These bearish behaviors are important to note, as total hedge fund interest fell by 10 funds by the end of the third quarter.

Let’s now take a look at hedge fund activity in other stocks similar to Centene Corp (NYSE:CNC). We will take a look at Tractor Supply Company (NASDAQ:TSCO), Autodesk, Inc. (NASDAQ:ADSK), Host Hotels and Resorts Inc (NYSE:HST), and Skyworks Solutions Inc (NASDAQ:SWKS). This group of stocks’ market values are closest to CNC’s market value.

As you can see these stocks had an average of 28 hedge funds with bullish positions and the average amount invested in these stocks was $1.43 billion. That figure was $333 million in CNC’s case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Host Hotels and Resorts Inc (NYSE:HST) is the least popular one with only 17 bullish hedge fund positions. Centene Corp (NYSE:CNC) is not the least popular stock in this group but hedge fund interest is still below average and falling fast. This is a negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. In this regard ADSK might be a better candidate to consider a long position in.

Disclosure: None