Many prominent investors, including Warren Buffett, David Tepper and Stan Druckenmiller, have been cautious regarding the current bull market and missed out as the stock market reached another high in recent weeks. On the other hand, technology hedge funds weren’t timid and registered double digit market beating gains. Financials, energy and industrial stocks aren’t doing great but many of the stocks that delivered strong returns since March are still going very strong and hedge funds actually increased their positions in these stocks. In this article we will find out how hedge fund sentiment to Cincinnati Financial Corporation (NASDAQ:CINF) changed recently.
Is CINF a good stock to buy now? The best stock pickers were becoming less confident. The number of long hedge fund positions decreased by 1 lately. Cincinnati Financial Corporation (NASDAQ:CINF) was in 19 hedge funds’ portfolios at the end of the third quarter of 2020. The all time high for this statistic is 31. Our calculations also showed that CINF isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 20 hedge funds in our database with CINF positions at the end of the second quarter.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 66 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
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 recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. With all of this in mind we’re going to take a gander at the recent hedge fund action surrounding Cincinnati Financial Corporation (NASDAQ:CINF).
Do Hedge Funds Think CINF Is A Good Stock To Buy Now?
Heading into the fourth quarter of 2020, a total of 19 of the hedge funds tracked by Insider Monkey were long this stock, a change of -5% from the previous quarter. The graph below displays the number of hedge funds with bullish position in CINF over the last 21 quarters. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, Select Equity Group held the most valuable stake in Cincinnati Financial Corporation (NASDAQ:CINF), which was worth $652.7 million at the end of the third quarter. On the second spot was Citadel Investment Group which amassed $43.4 million worth of shares. Fairpointe Capital, Millennium Management, and Citadel Investment Group 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 Select Equity Group allocated the biggest weight to Cincinnati Financial Corporation (NASDAQ:CINF), around 3.21% of its 13F portfolio. Fairpointe Capital is also relatively very bullish on the stock, designating 2.22 percent of its 13F equity portfolio to CINF.
Judging by the fact that Cincinnati Financial Corporation (NASDAQ:CINF) has experienced declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there exists a select few hedgies that elected to cut their entire stakes in the third quarter. It’s worth mentioning that Phill Gross and Robert Atchinson’s Adage Capital Management said goodbye to the largest investment of all the hedgies followed by Insider Monkey, comprising about $4.6 million in stock. Michael Gelband’s fund, ExodusPoint Capital, also said goodbye to its stock, about $3.4 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 1 funds in the third quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Cincinnati Financial Corporation (NASDAQ:CINF). We will take a look at KB Financial Group, Inc. (NYSE:KB), Boston Properties, Inc. (NYSE:BXP), ABIOMED, Inc. (NASDAQ:ABMD), Liberty Global plc (NASDAQ:LBTYA), VICI Properties Inc. (NYSE:VICI), Jack Henry & Associates, Inc. (NASDAQ:JKHY), and SVB Financial Group (NASDAQ:SIVB). This group of stocks’ market values are closest to CINF’s market value.
|Ticker||No of HFs with positions||Total Value of HF Positions (x1000)||Change in HF Position|
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $657 million. That figure was $736 million in CINF’s case. VICI Properties Inc. (NYSE:VICI) is the most popular stock in this table. On the other hand KB Financial Group, Inc. (NYSE:KB) is the least popular one with only 6 bullish hedge fund positions. Cincinnati Financial Corporation (NASDAQ:CINF) is not the least popular stock in this group but hedge fund interest is still below average. Our overall hedge fund sentiment score for CINF is 41.5. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and surpassed the market again by 15.8 percentage points. Unfortunately CINF wasn’t nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CINF investors were disappointed as the stock returned 2.1% since the end of September (through 12/14) 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 most of these stocks already outperformed the market in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.