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Should You Buy Shares of CIGNA Corporation (CI)?

The third quarter was a rough one for most investors, as fears of an interest rate hike in the U.S, a weakening economy in China, and a stagnant Europe, weighed heavily on the minds of investors. Both the S&P 500 and Russell 2000 sank as a result, with the Russell 2000, which is composed of smaller companies, being hit especially hard. This was primarily due to hedge funds, which are big supporters of small-cap stocks, pulling some of their capital out of the volatile markets during this time. Let’s look at how this market volatility affected the sentiment of hedge funds towards CIGNA Corporation (NYSE:CI), and what that likely means for the prospects of the company and its stock.

CIGNA Corporation (NYSE:CI) was in 76 hedge funds’ portfolios at the end of September. CIGNA Corporation (NYSE:CI) investors should be aware of a decrease in the hedge fund interest of late. There were 78 hedge funds in our database with CIGNA Corporation (NYSE:CI) positions at the end of the previous quarter. The level and the change in hedge fund popularity aren’t the only variables you need to analyze to decipher hedge funds’ perspectives. A stock may witness a boost in popularity but it may still be less popular than similarly priced stocks. That’s why at the end of this article we will examine companies such as BCE Inc. (USA) (NYSE:BCE), Yum! Brands, Inc. (NYSE:YUM), and Avago Technologies Ltd (NASDAQ:AVGO) to gather more data points.

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If you’d ask most traders, hedge funds are viewed as unimportant, old investment tools of the past. While there are over 8000 funds with their doors open today, our experts look at the aristocrats of this club, around 700 funds. These investment experts orchestrate most of the hedge fund industry’s total asset base, and by tracking their highest performing investments, Insider Monkey has found various investment strategies that have historically defeated the S&P 500 index. Insider Monkey’s small-cap hedge fund strategy outperformed the S&P 500 index by 12 percentage points per year for a decade in their back tests.

Now, let’s go over the fresh action regarding CIGNA Corporation (NYSE:CI).

Hedge fund activity in CIGNA Corporation (NYSE:CI)

At the end of Q3, a total of 76 of the hedge funds tracked by Insider Monkey were bullish in this stock, a decrease of 3% from the previous quarter. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were upping their holdings substantially (or already accumulated large positions).

When looking at the hedgies followed by Insider Monkey, Glenview Capital, managed by Larry Robbins, holds the number one position in CIGNA Corporation (NYSE:CI). Glenview Capital has a $620.5 million position in the stock, comprising 3.1% of its 13F portfolio. Sitting at the No. 2 spot is Pzena Investment Management, led by Richard S. Pzena, holding a $254.2 million position; 1.6% of its 13F portfolio is allocated to the stock. Other members of the smart money that hold long positions include D E Shaw, Farallon Capital and Richard Barrera’s Roystone Capital Partners.

Because CIGNA Corporation (NYSE:CI) has experienced a bearish sentiment from hedge fund managers, we can see that there was a specific group of money managers that elected to cut their full holdings at the end of the third quarter. At the top of the heap, Andreas Halvorsen’s Viking Global dropped the biggest stake of the “upper crust” of funds tracked by Insider Monkey, valued at close to $472.2 million in stock. Doug Silverman and Alexander Klabin’s fund, Senator Investment Group, also said goodbye to its stock, about $89.1 million worth. These moves are interesting, as total hedge fund interest fell by 2 funds at the end of the third quarter.

Let’s also examine hedge fund activity in other stocks similar to CIGNA Corporation (NYSE:CI). We will take a look at BCE Inc. (USA) (NYSE:BCE), Yum! Brands, Inc. (NYSE:YUM), Avago Technologies Ltd (NASDAQ:AVGO), and Prudential Financial Inc (NYSE:PRU). This group of stocks’ market caps resemble CIGNA Corporation (NYSE:CI)’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
BCE 14 247070 -5
YUM 65 5045676 6
AVGO 66 4396246 -6
PRU 37 970845 -2

As you can see these stocks had an average of 46 hedge funds with bullish positions and the average amount invested in these stocks was $2.67 billion. Cigna is not just more popular than these funds, but also the total value of hedge funds’ positions stood at $3.24 billion at the end of September. This could suggest that hedge funds like CIGNA and, therefore, it may be a good idea to analyze it in detail and potentially include it in your portfolio.

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