Was The Smart Money Right About Cigna Corporation (CI)?

As we already know from media reports and hedge fund investor letters, hedge funds delivered their best returns in a decade. Most investors who decided to stick with hedge funds after a rough 2018 recouped their losses by the end of the fourth quarter of 2019. A significant number of hedge funds continued their strong performance in 2020 and 2021 as well. We get to see hedge funds’ thoughts towards the market and individual stocks by aggregating their quarterly portfolio movements and reading their investor letters. In this article, we will particularly take a look at what hedge funds think about Cigna Corporation (NYSE:CI).

Is Cigna Corporation (NYSE:CI) an attractive investment now? Investors who are in the know were buying. The number of bullish hedge fund bets inched up by 10 lately. Cigna Corporation (NYSE:CI) was in 63 hedge funds’ portfolios at the end of the second quarter of 2021. The all time high for this statistic is 76. Our calculations also showed that CI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings).

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 S&P 500 ETFs by more than 79 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, the demand for helium is soaring and there is a helium supply shortage, so we are checking out stock pitches like this emerging helium stock. We go through lists like the 10 best EV stocks to pick the next Tesla that will deliver a 10x return. 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 homepage. Now we’re going to take a gander at the new hedge fund action surrounding Cigna Corporation (NYSE:CI).

Do Hedge Funds Think CI Is A Good Stock To Buy Now?

At second quarter’s end, a total of 63 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the previous quarter. By comparison, 72 hedge funds held shares or bullish call options in CI 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.

The largest stake in Cigna Corporation (NYSE:CI) was held by BloombergSen, which reported holding $327.9 million worth of stock at the end of June. It was followed by Glenview Capital with a $304.5 million position. Other investors bullish on the company included Steadfast Capital Management, Millennium Management, and Lyrical Asset Management. In terms of the portfolio weights assigned to each position BloombergSen allocated the biggest weight to Cigna Corporation (NYSE:CI), around 17.24% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, earmarking 14.82 percent of its 13F equity portfolio to CI.

Consequently, specific money managers were leading the bulls’ herd. Lyrical Asset Management, managed by Andrew Wellington and Jeff Keswin, initiated the largest position in Cigna Corporation (NYSE:CI). Lyrical Asset Management had $213.1 million invested in the company at the end of the quarter. Renaissance Technologies also initiated a $34.1 million position during the quarter. The following funds were also among the new CI investors: Charles Clough’s Clough Capital Partners, Vishal Saluja and Pham Quang’s Endurant Capital Management, and D. E. Shaw’s D E Shaw.

Let’s check out 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 Enbridge Inc (NYSE:ENB), PNC Financial Services Group Inc. (NYSE:PNC), Brookfield Asset Management Inc. (NYSE:BAM), Petroleo Brasileiro S.A. – Petrobras (NYSE:PBR), FedEx Corporation (NYSE:FDX), The Bank of Nova Scotia (NYSE:BNS), and Mercadolibre Inc (NASDAQ:MELI). This group of stocks’ market caps match CI’s market cap.

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As you can see these stocks had an average of 37.9 hedge funds with bullish positions and the average amount invested in these stocks was $1681 million. That figure was $2807 million in CI’s case. Mercadolibre Inc (NASDAQ:MELI) is the most popular stock in this table. On the other hand The Bank of Nova Scotia (NYSE:BNS) is the least popular one with only 14 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. Our overall hedge fund sentiment score for CI is 75.7. 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 positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 26.3% in 2021 through October 29th and beat the market again by 2.3 percentage points. Unfortunately CI wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CI were disappointed as the stock returned -9.5% since the end of June (through 10/29) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.

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

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