How do you pick the next stock to invest in? One way would be to spend days of research browsing through thousands of publicly traded companies. However, an easier way is to look at the stocks that smart money investors are collectively bullish on. Hedge funds and other institutional investors usually invest large amounts of capital and have to conduct due diligence while choosing their next pick. They don’t always get it right, but, on average, their stock picks historically generated strong returns after adjusting for known risk factors. With this in mind, let’s take a look at the recent hedge fund activity surrounding Cigna Corporation (NYSE:CI) and determine whether hedge funds had an edge regarding this stock.
Cigna Corporation (NYSE:CI) investors should pay attention to a decrease in activity from the world’s largest hedge funds in recent months. Cigna Corporation (NYSE:CI) was in 72 hedge funds’ portfolios at the end of June. The all time high for this statistics is 76. There were 74 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 Q2 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.
To the average investor there are several indicators stock traders employ to assess publicly traded companies. Some of the most useful indicators are hedge fund and insider trading sentiment. Our experts have shown that, historically, those who follow the best picks of the elite investment managers can trounce the market by a solid margin (see the details here).
Arthur B Cohen and Joseph Healey of Healthcor Management LP
At Insider Monkey we scour multiple sources to uncover the next great investment idea. Currently, investors are pessimistic about commercial real estate investments. So, we are checking out this contrarian play to diversify our market exposure. We go through lists like the 10 most profitable companies in America 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. If you want to find out the best healthcare stock to buy right now, you can watch our latest hedge fund manager interview here. With all of this in mind let’s take a peek at the recent hedge fund action regarding Cigna Corporation (NYSE:CI).
How have hedgies been trading Cigna Corporation (NYSE:CI)?
At the end of the second quarter, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -3% from the first quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CI over the last 20 quarters. With hedgies’ positions undergoing their usual ebb and flow, there exists an “upper tier” of key hedge fund managers who were upping their holdings substantially (or already accumulated large positions).
The largest stake in Cigna Corporation (NYSE:CI) was held by Viking Global, which reported holding $553.5 million worth of stock at the end of September. It was followed by BloombergSen with a $277 million position. Other investors bullish on the company included Kensico Capital, Glenview Capital, and Lakewood Capital Management. In terms of the portfolio weights assigned to each position BloombergSen allocated the biggest weight to Cigna Corporation (NYSE:CI), around 19.19% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, earmarking 19.13 percent of its 13F equity portfolio to CI.
Since Cigna Corporation (NYSE:CI) has faced falling interest from the entirety of the hedge funds we track, we can see that there is a sect of hedgies that slashed their positions entirely heading into Q3. Intriguingly, Christopher James’s Partner Fund Management said goodbye to the largest investment of the 750 funds monitored by Insider Monkey, valued at close to $34.5 million in stock, and Alok Agrawal’s Bloom Tree Partners was right behind this move, as the fund said goodbye to about $29.5 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 2 funds heading into Q3.
Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as Cigna Corporation (NYSE:CI) but similarly valued. We will take a look at Prologis Inc (NYSE:PLD), Caterpillar Inc. (NYSE:CAT), Dominion Energy Inc. (NYSE:D), The Goldman Sachs Group, Inc. (NYSE:GS), The Estee Lauder Companies Inc (NYSE:EL), The Blackstone Group Inc. (NYSE:BX), and Stryker Corporation (NYSE:SYK). This group of stocks’ market values match CI’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| PLD | 35 | 433481 | -5 |
| CAT | 39 | 2667687 | 5 |
| D | 33 | 366229 | -1 |
| GS | 69 | 3543027 | -5 |
| EL | 46 | 1197830 | 2 |
| BX | 47 | 1434341 | -2 |
| SYK | 50 | 1257094 | 2 |
| Average | 45.6 | 1557098 | -0.6 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $1557 million. That figure was $2871 million in CI’s case. The Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Dominion Energy Inc. (NYSE:D) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Cigna Corporation (NYSE:CI) is more popular among hedge funds. Our overall hedge fund sentiment score for CI is 81.4. 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. 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 28.2% in 2020 through August 24th and still beat the market by 20.6 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 -5.3% since the end of the second 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.
Follow Cigna Holding Co (NYSE:CI)
Follow Cigna Holding Co (NYSE:CI)
Disclosure: None. This article was originally published at Insider Monkey.
