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Do Hedge Funds and Insiders Love Cincinnati Financial Corporation (NASDAQ:CINF)? – XL Group plc (NYSE:XL), Cna Financial Corp (NYSE:CNA)

Cincinnati Financial Corporation (NASDAQ:CINF) was in 15 hedge funds’ portfolio at the end of the fourth quarter of 2012. CINF has seen a decrease in support from the world’s most elite money managers in recent months. There were 15 hedge funds in our database with CINF positions at the end of the previous quarter.

In the eyes of most traders, hedge funds are seen as unimportant, old financial tools of the past. While there are more than 8000 funds in operation at the moment, we at Insider Monkey hone in on the elite of this club, about 450 funds. Most estimates calculate that this group oversees the lion’s share of all hedge funds’ total asset base, and by watching their best picks, we have formulated a number of investment strategies that have historically outpaced the market. Our small-cap hedge fund strategy outpaced the S&P 500 index by 18 percentage points per annum for a decade in our back tests, and since we’ve started sharing our picks with our subscribers at the end of August 2012, we have outclassed the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Equally as beneficial, positive insider trading sentiment is another way to parse down the investments you’re interested in. Just as you’d expect, there are plenty of incentives for an insider to drop shares of his or her company, but only one, very simple reason why they would behave bullishly. Various academic studies have demonstrated the market-beating potential of this strategy if “monkeys” know where to look (learn more here).

Now, let’s take a gander at the key action encompassing Cincinnati Financial Corporation (NASDAQ:CINF).

What have hedge funds been doing with Cincinnati Financial Corporation (NASDAQ:CINF)?

Heading into 2013, a total of 15 of the hedge funds we track were long in this stock, a change of 0% from one quarter earlier. With hedgies’ capital changing hands, there exists a select group of noteworthy hedge fund managers who were boosting their stakes meaningfully.

Of the funds we track, Jean-Marie Eveillard’s First Eagle Investment Management had the largest position in Cincinnati Financial Corporation (NASDAQ:CINF), worth close to $436 million, accounting for 1.6% of its total 13F portfolio. The second largest stake is held by Winton Capital Management, managed by David Harding, which held a $24 million position; 0% of its 13F portfolio is allocated to the stock. Remaining hedgies that are bullish include Jim Simons’s Renaissance Technologies, Chuck Royce’s Royce & Associates and Ken Fisher’s Fisher Asset Management.

Judging by the fact that Cincinnati Financial Corporation (NASDAQ:CINF) has faced a declination in interest from the aggregate hedge fund industry, we can see that there was a specific group of fund managers that slashed their full holdings last quarter. It’s worth mentioning that Sander Gerber’s Hudson Bay Capital Management dropped the largest position of the “upper crust” of funds we track, valued at about $0 million in call options, and Tom Russo of Gardner Russo & Gardner was right behind this move, as the fund said goodbye to about $0 million worth. These transactions are important to note, as total hedge fund interest stayed the same (this is a bearish signal in our experience).

How have insiders been trading Cincinnati Financial Corporation (NASDAQ:CINF)?

Insider buying is best served when the primary stock in question has experienced transactions within the past six months. Over the latest 180-day time period, Cincinnati Financial Corporation (NASDAQ:CINF) has experienced 1 unique insiders purchasing, and 1 insider sales (see the details of insider trades here).

Let’s go over hedge fund and insider activity in other stocks similar to Cincinnati Financial Corporation (NASDAQ:CINF). These stocks are Alleghany Corporation (NYSE:Y), XL Group plc (NYSE:XL), Cna Financial Corp (NYSE:CNA), Arch Capital Group Ltd. (NASDAQ:ACGL), and Everest Re Group Ltd (NYSE:RE). This group of stocks belong to the property & casualty insurance industry and their market caps are similar to CINF’s market cap.

Company Name # of Hedge Funds # of Insiders Buying # of Insiders Selling
Alleghany Corporation (NYSE:Y) 26 0 1
XL Group plc (NYSE:XL) 23 0 2
Cna Financial Corp (NYSE:CNA) 14 0 2
Arch Capital Group Ltd. (NASDAQ:ACGL) 10 0 6
Everest Re Group Ltd (NYSE:RE) 18 0 2

With the results exhibited by Insider Monkey’s tactics, retail investors should always pay attention to hedge fund and insider trading activity, and Cincinnati Financial Corporation (NASDAQ:CINF) shareholders fit into this picture quite nicely.

Click here to learn more about Insider Monkey’s Hedge Fund Newsletter

Insider Monkey’s small-cap strategy returned 37% between September 2012 and March 2013 versus 12.9% for the S&P 500 index. Try it now by clicking the link above.

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