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Should You Buy Centene Corp (NYSE:CNC)?

Centene Corp (NYSE:CNC) was in 24 hedge funds’ portfolio at the end of the fourth quarter of 2012. CNC shareholders have witnessed an increase in hedge fund sentiment of late. There were 22 hedge funds in our database with CNC holdings at the end of the previous quarter.

Centene Corp

According to most stock holders, hedge funds are perceived as unimportant, outdated financial vehicles of the past. While there are over 8000 funds in operation at the moment, we choose to focus on the upper echelon of this club, about 450 funds. It is estimated that this group controls most of all hedge funds’ total capital, and by paying attention to their top equity investments, we have found a number of investment strategies that have historically outperformed the S&P 500 index. Our small-cap hedge fund strategy outstripped the S&P 500 index by 18 percentage points annually for a decade in our back tests, and since we’ve began to sharing our picks with our subscribers at the end of August 2012, we have beaten the S&P 500 index by 25 percentage points in 6.5 month (explore the details and some picks here).

Just as beneficial, optimistic insider trading sentiment is another way to break down the stock market universe. There are many motivations for an insider to drop shares of his or her company, but only one, very clear reason why they would initiate a purchase. Several empirical studies have demonstrated the useful potential of this method if investors know where to look (learn more here).

With all of this in mind, let’s take a glance at the recent action encompassing Centene Corp (NYSE:CNC).

Hedge fund activity in Centene Corp (NYSE:CNC)

At the end of the fourth quarter, a total of 24 of the hedge funds we track were bullish in this stock, a change of 9% from one quarter earlier. With hedgies’ positions undergoing their usual ebb and flow, there exists a few key hedge fund managers who were increasing their holdings substantially.

According to our comprehensive database, Daruma Asset Management, managed by Mariko Gordon, holds the largest position in Centene Corp (NYSE:CNC). Daruma Asset Management has a $48 million position in the stock, comprising 2.8% of its 13F portfolio. On Daruma Asset Management’s heels is SAC Capital Advisors, managed by Steven Cohen, which held a $20 million position; 0.1% of its 13F portfolio is allocated to the stock. Remaining hedge funds with similar optimism include Lee Hobson’s Highside Capital Management, Roberto Mignone’s Bridger Management and Keith Meister’s Corvex Capital.

Consequently, key hedge funds were breaking ground themselves. Columbus Circle Investors, managed by Donald Chiboucis, assembled the most outsized position in Centene Corp (NYSE:CNC). Columbus Circle Investors had 13 million invested in the company at the end of the quarter. Samuel Isaly’s OrbiMed Advisors also made a $8 million investment in the stock during the quarter. The other funds with new positions in the stock are John Overdeck and David Siegel’s Two Sigma Advisors, Mark Kingdon’s Kingdon Capital, and Jacob Gottlieb’s Visium Asset Management.

Insider trading activity in Centene Corp (NYSE:CNC)

Insider purchases made by high-level executives is at its handiest when the company in focus has experienced transactions within the past six months. Over the last half-year time period, Centene Corp (NYSE:CNC) has experienced zero unique insiders purchasing, and 6 insider sales (see the details of insider trades here).

With the results demonstrated by Insider Monkey’s tactics, everyday investors should always keep an eye on hedge fund and insider trading activity, and Centene Corp (NYSE:CNC) is an important part of this process.

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

Insider Monkey’s small-cap strategy returned 29.2% between September 2012 and February 2013 versus 8.7% for the S&P 500 index. Try it now by clicking the link above.

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