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Were Hedge Funds Right About Piling Into Cigna Corporation (CI)?

Coronavirus is probably the #1 concern in investors’ minds right now. It should be. On February 27th we published this article and predicted that US stocks will go down by at least 20% in the next 3-6 months. We also told you to short the market ETFs and buy long-term bonds. Investors who agreed with us and replicated these trades are up double digits whereas the market is down double digits. In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. Before we spend countless hours researching a company, we like to analyze what insiders, hedge funds and billionaire investors think of the stock first. This is a necessary first step in our investment process because our research has shown that the elite investors’ consensus returns have been exceptional. In the following paragraphs, we find out what the billionaire investors and hedge funds think of Cigna Corporation (NYSE:CI).

Is Cigna Corporation (NYSE:CI) the right pick for your portfolio? Investors who are in the know are getting more bullish. The number of long hedge fund bets improved by 7 lately. Our calculations also showed that CI isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video below for Q3 rankings). CI was in 72 hedge funds’ portfolios at the end of the fourth quarter of 2019. There were 65 hedge funds in our database with CI holdings at the end of the previous quarter.
5 Most Popular Stocks Among Hedge Funds
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey’s monthly stock picks returned 72.9% since March 2017 and outperformed the S&P 500 ETFs by more than 41 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.

GLENVIEW CAPITAL

Larry Robbins of Glenview Capital

We leave no stone unturned when looking for the next great investment idea. For example Europe is set to become the world’s largest cannabis market, so we check out this European marijuana stock pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. In January, we recommended a long position in one of the most shorted stocks in the market, and that stock returned more than 50% despite the large losses in the market since our recommendation. Now we’re going to go over the new hedge fund action surrounding Cigna Corporation (NYSE:CI).

How are hedge funds trading Cigna Corporation (NYSE:CI)?

Heading into the first quarter of 2020, a total of 72 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 11% from the third quarter of 2019. Below, you can check out the change in hedge fund sentiment towards CI over the last 18 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few notable hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).

Among these funds, Glenview Capital held the most valuable stake in Cigna Corporation (NYSE:CI), which was worth $854.1 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $306.7 million worth of shares. BloombergSen, Kensico Capital, and Lakewood Capital Management 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 Solel Partners allocated the biggest weight to Cigna Corporation (NYSE:CI), around 22.65% of its 13F portfolio. BloombergSen is also relatively very bullish on the stock, dishing out 15.22 percent of its 13F equity portfolio to CI.

Now, specific money managers have been driving this bullishness. Viking Global, managed by Andreas Halvorsen, assembled the most valuable position in Cigna Corporation (NYSE:CI). Viking Global had $93.5 million invested in the company at the end of the quarter. Craig Peskin and Peter Fleiss’s Solel Partners also made a $40.4 million investment in the stock during the quarter. The other funds with new positions in the stock are Arthur B Cohen and Joseph Healey’s Healthcor Management LP, Steve Cohen’s Point72 Asset Management, and Jeremy Green’s Redmile Group.

Let’s also examine 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 Truist Financial Corporation (NYSE:TFC), Tesla Inc. (NASDAQ:TSLA), CNOOC Limited (NYSE:CEO), and The Estee Lauder Companies Inc (NYSE:EL). This group of stocks’ market caps resemble CI’s market cap.

Ticker No of HFs with positions Total Value of HF Positions (x1000) Change in HF Position
TFC 35 875715 4
TSLA 51 3043687 19
CEO 14 235359 -1
EL 50 1697103 2
Average 37.5 1462966 6

View table here if you experience formatting issues.

As you can see these stocks had an average of 37.5 hedge funds with bullish positions and the average amount invested in these stocks was $1463 million. That figure was $4119 million in CI’s case. Tesla Inc. (NASDAQ:TSLA) is the most popular stock in this table. On the other hand CNOOC Limited (NYSE:CEO) is the least popular one with only 14 bullish hedge fund positions. Compared to these stocks Cigna Corporation (NYSE:CI) is more popular among hedge funds. 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 10.1 percentage points. These stocks lost 12.9% in 2020 through March 9th but still managed to beat the market by 1.9 percentage points. Hedge funds were also right about betting on CI as the stock returned -11.2% so far in Q1 (through March 9th) and outperformed the market by an even larger margin. Hedge funds were clearly right about piling into this stock relative to other stocks with similar market capitalizations.

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

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