Cigna Corporation (CI): Were Hedge Funds Right About This Stock?

We at Insider Monkey have gone over 821 13F filings that hedge funds and prominent investors are required to file by the SEC The 13F filings show the funds’ and investors’ portfolio positions as of March 31st, near the height of the coronavirus market crash. We are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article we look at how hedge funds traded Cigna Corporation (NYSE:CI) and determine whether the smart money was really smart about this stock.

Cigna Corporation (NYSE:CI) investors should be aware of an increase in support from the world’s most elite money managers recently. CI was in 74 hedge funds’ portfolios at the end of the first quarter of 2020. There were 72 hedge funds in our database with CI positions at the end of the previous quarter. Our calculations also showed that CI isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

In the eyes of most traders, hedge funds are perceived as underperforming, outdated financial tools of yesteryear. While there are greater than 8000 funds with their doors open at the moment, Our researchers hone in on the elite of this club, approximately 850 funds. Most estimates calculate that this group of people oversee the lion’s share of the hedge fund industry’s total capital, and by keeping an eye on their highest performing equity investments, Insider Monkey has uncovered numerous investment strategies that have historically outperformed the broader indices. Insider Monkey’s flagship short hedge fund strategy exceeded the S&P 500 short ETFs by around 20 percentage points per annum since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Brad Farber Atika Capital

Brad Farber of Atika Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a “weekend trading strategy”, so we look into his strategy’s picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller’s investor letter. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s view the fresh hedge fund action surrounding Cigna Corporation (NYSE:CI).

What does smart money think about Cigna Corporation (NYSE:CI)?

Heading into the second quarter of 2020, a total of 74 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 3% from the previous quarter. By comparison, 47 hedge funds held shares or bullish call options in CI a year ago. So, let’s see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Viking Global held the most valuable stake in Cigna Corporation (NYSE:CI), which was worth $451.4 million at the end of the third quarter. On the second spot was BloombergSen which amassed $261.5 million worth of shares. Glenview Capital, Kensico Capital, and Farallon Capital were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Solel Partners allocated the biggest weight to Cigna Corporation (NYSE:CI), around 23.32% of its 13F portfolio. Tavio Capital is also relatively very bullish on the stock, earmarking 18.01 percent of its 13F equity portfolio to CI.

As aggregate interest increased, key hedge funds were breaking ground themselves. Rhenman & Partners Asset Management, managed by Henrik Rhenman, initiated the most outsized position in Cigna Corporation (NYSE:CI). Rhenman & Partners Asset Management had $18.6 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also initiated a $16.2 million position during the quarter. The other funds with brand new CI positions are John D. Gillespie’s Prospector Partners, Brad Farber’s Atika Capital, and Jonathan Kolatch’s Redwood Capital Management.

Let’s also examine hedge fund activity in other stocks similar to Cigna Corporation (NYSE:CI). We will take a look at PetroChina Company Limited (NYSE:PTR), Lowe’s Companies, Inc. (NYSE:LOW), Fiserv, Inc. (NASDAQ:FISV), and Caterpillar Inc. (NYSE:CAT). All of these stocks’ market caps are closest to CI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
PTR 7 66671 -6
LOW 71 3844984 -6
FISV 67 2949178 -11
CAT 34 2186891 -18
Average 44.75 2261931 -10.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 44.75 hedge funds with bullish positions and the average amount invested in these stocks was $2262 million. That figure was $2988 million in CI’s case. Lowe’s Companies, Inc. (NYSE:LOW) is the most popular stock in this table. On the other hand PetroChina Company Limited (NYSE:PTR) is the least popular one with only 7 bullish hedge fund positions. Compared to these stocks Cigna Corporation (NYSE:CI) is more popular among hedge funds. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 13.3% in 2020 through June 25th and still beat the market by 16.8 percentage points. Unfortunately CI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CI were disappointed as the stock returned 4.7% during the second quarter (through June 25th) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

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Disclosure: None. This article was originally published at Insider Monkey.