Here is What Hedge Funds Think About CIGNA Corporation (CI)

We at Insider Monkey have gone over 738 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. In this article, we look at what those funds think of CIGNA Corporation (NYSE:CI) based on that data.

Is CIGNA Corporation (NYSE:CI) the right pick for your portfolio? Prominent investors are turning less bullish. The number of bullish hedge fund bets shrunk by 21 recently. Our calculations also showed that ci isn’t among the 30 most popular stocks among hedge funds. CI was in 47 hedge funds’ portfolios at the end of March. There were 68 hedge funds in our database with CI positions at the end of the previous quarter.

So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds’ small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 40 percentage points since May 2014 through May 30, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.

Michael Lowenstein Kensico Capital

Michael Lowenstein of Kensico Capital

Let’s take a peek at the new hedge fund action regarding CIGNA Corporation (NYSE:CI).

What have hedge funds been doing with CIGNA Corporation (NYSE:CI)?

Heading into the second quarter of 2019, a total of 47 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -31% from one quarter earlier. By comparison, 66 hedge funds held shares or bullish call options in CI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

No of Hedge Funds with CI Positions

Among these funds, Glenview Capital held the most valuable stake in CIGNA Corporation (NYSE:CI), which was worth $703.9 million at the end of the first quarter. On the second spot was D E Shaw which amassed $275.5 million worth of shares. Moreover, AQR Capital Management, Kensico Capital, and BloombergSen were also bullish on CIGNA Corporation (NYSE:CI), allocating a large percentage of their portfolios to this stock.

Seeing as CIGNA Corporation (NYSE:CI) has witnessed declining sentiment from the smart money, logic holds that there was a specific group of money managers who sold off their entire stakes heading into Q3. At the top of the heap, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest stake of the 700 funds watched by Insider Monkey, valued at about $192.6 million in stock, and Dan Loeb’s Third Point was right behind this move, as the fund dropped about $109.2 million worth. These moves are important to note, as aggregate hedge fund interest was cut by 21 funds heading into Q3.

Let’s also examine hedge fund activity in other stocks similar to CIGNA Corporation (NYSE:CI). We will take a look at CSX Corporation (NASDAQ:CSX), Schlumberger Limited (NYSE:SLB), The Estee Lauder Companies Inc (NYSE:EL), and Walgreens Boots Alliance Inc (NASDAQ:WBA). This group of stocks’ market valuations are similar to CI’s market valuation.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
CSX 44 5573152 -6
SLB 49 2069865 -3
EL 39 1436457 6
WBA 33 586665 -6
Average 41.25 2416535 -2.25

View table here if you experience formatting issues.

As you can see these stocks had an average of 41.25 hedge funds with bullish positions and the average amount invested in these stocks was $2417 million. That figure was $3021 million in CI’s case. Schlumberger Limited (NYSE:SLB) is the most popular stock in this table. On the other hand Walgreens Boots Alliance Inc (NASDAQ:WBA) is the least popular one with only 33 bullish hedge fund positions. CIGNA Corporation (NYSE:CI) is not the most popular stock in this group but hedge fund interest is still above average. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 20 most popular stocks among hedge funds returned 1.9% in Q2 through May 30th and outperformed the S&P 500 ETF (SPY) by more than 3 percentage points. Unfortunately CI wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CI were disappointed as the stock returned -8% during the same period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.

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