Hedge Funds Are Dipping Their Toes Into CNO Financial Group Inc (CNO)

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 823 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds’ and investors’ portfolio positions as of June 30th, when the S&P 500 Index was trading around the 3100 level. Stocks kept going up since then. In this article we look at how hedge funds traded CNO Financial Group Inc (NYSE:CNO) and determine whether the smart money was really smart about this stock.

Is CNO Financial Group Inc (NYSE:CNO) a splendid investment today? Investors who are in the know were in a bullish mood. The number of bullish hedge fund bets rose by 3 recently. CNO Financial Group Inc (NYSE:CNO) was in 18 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 23. Our calculations also showed that CNO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks). There were 15 hedge funds in our database with CNO holdings at the end of March.

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

If you’d ask most investors, hedge funds are assumed to be underperforming, outdated investment vehicles of yesteryear. While there are over 8000 funds in operation at present, We choose to focus on the aristocrats of this club, around 850 funds. Most estimates calculate that this group of people handle the lion’s share of all hedge funds’ total capital, and by following their first-class equity investments, Insider Monkey has deciphered numerous investment strategies that have historically exceeded the market. Insider Monkey’s flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 34% since February 2017 (through August 17th) even though the market was up 53% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

Joe Huber - Huber Capital Management

Joe Huber of Huber Capital Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we are checking out this junior gold mining stock and we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind we’re going to take a look at the fresh hedge fund action surrounding CNO Financial Group Inc (NYSE:CNO).

Hedge fund activity in CNO Financial Group Inc (NYSE:CNO)

At the end of the second quarter, a total of 18 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 20% from the first quarter of 2020. On the other hand, there were a total of 14 hedge funds with a bullish position in CNO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Among these funds, Pzena Investment Management held the most valuable stake in CNO Financial Group Inc (NYSE:CNO), which was worth $132.6 million at the end of the third quarter. On the second spot was Paradice Investment Management which amassed $88.3 million worth of shares. Huber Capital Management, AQR Capital Management, and Arrowstreet 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 Paradice Investment Management allocated the biggest weight to CNO Financial Group Inc (NYSE:CNO), around 6.65% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, setting aside 4.17 percent of its 13F equity portfolio to CNO.

Consequently, key money managers were breaking ground themselves. Royce & Associates, managed by Chuck Royce, established the most outsized position in CNO Financial Group Inc (NYSE:CNO). Royce & Associates had $5.8 million invested in the company at the end of the quarter. Richard SchimeláandáLawrence Sapanski’s Cinctive Capital Management also initiated a $2.4 million position during the quarter. The other funds with new positions in the stock are Karim Abbadi and Edward McBride’s Centiva Capital and Matthew Hulsizer’s PEAK6 Capital Management.

Let’s check out hedge fund activity in other stocks similar to CNO Financial Group Inc (NYSE:CNO). These stocks are Acadia Healthcare Company Inc (NASDAQ:ACHC), FormFactor, Inc. (NASDAQ:FORM), IGM Biosciences, Inc. (NASDAQ:IGMS), Bottomline Technologies (de), Inc. (NASDAQ:EPAY), TG Therapeutics Inc (NASDAQ:TGTX), Sabre Corporation (NASDAQ:SABR), and NCR Corporation (NYSE:NCR). All of these stocks’ market caps resemble CNO’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
ACHC 23 381810 -1
FORM 23 113808 1
IGMS 16 679671 2
EPAY 18 116704 0
TGTX 34 631710 8
SABR 39 412328 9
NCR 32 195774 0
Average 26.4 361686 2.7

View table here if you experience formatting issues.

As you can see these stocks had an average of 26.4 hedge funds with bullish positions and the average amount invested in these stocks was $362 million. That figure was $287 million in CNO’s case. Sabre Corporation (NASDAQ:SABR) is the most popular stock in this table. On the other hand IGM Biosciences, Inc. (NASDAQ:IGMS) is the least popular one with only 16 bullish hedge fund positions. CNO Financial Group Inc (NYSE:CNO) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CNO is 35.8. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. This is a slightly negative signal and we’d rather spend our time researching stocks that hedge funds are piling on. 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 24.8% in 2020 through the end of September and surpassed the market by 19.3 percentage points. Unfortunately CNO wasn’t nearly as popular as these 10 stocks (hedge fund sentiment was quite bearish); CNO investors were disappointed as the stock returned 3.8% in the third quarter 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.