Is CIGNA Corporation (NYSE:CI) a good stock to buy now? The stock skyrocketed by more than 11% on June 15 following a Wall Street Journal report that Anthem Inc (NYSE:ANTM) has shown interest in acquiring the insurance company at $175 per share, which was a 27% upside from where the CIGNA Corporation (NYSE:CI)’s stock was trading before June 15. However, a new report suggested that Anthem went public with an offer of $184 per share to acquire CIGNA, which raised the value of the deal $47.5 billion. However, in a statement CIGNA said that its board had rejected the offer from Anthem and said in a letter that they were deeply disappointed with the Anthem’s actions to go public with the takeover bid. The WSJ further said that Anthem is taking the offer public in order to put pressure on Cigna’s board through its shareholders. What will eventually come out of this takeover approach and attempt from Anthem is still unknown. But, how do the hedge funds feel about CIGNA Corporation (NYSE:CI) stock?
We don’t just track the latest moves of hedge funds. We are, in fact, more interested in their 13F filings, which we use to determine the top 15 small-cap stocks held by the funds we track. We gather and share this information based on 16 years of research which showed that these 15 most popular small-cap picks have a great potential to outperform the market, beating the S&P 500 Total Return Index by nearly one percentage point per month in backtests, and easily beating the most popular large-cap picks of funds, which nonetheless get the majority of their collective capital. Why pay fees to invest in both the best and worst ideas of a particular hedge fund when you can simply mimic only the very best ideas of the best fund managers on your own? Since the beginning of forward testing in August 2012, the Insider Monkey small-cap strategy has outperformed the market every year, returning 142%, nearly 2.5 times greater returns than the S&P 500 during the same period (see more details here).
Let’s take a look at insider transactions involving Cigna to get more insight into the stock. According to our database, there were no insider purchases during the first quarter, but there were many insider sales in the last couple of months. This shows a strong negative insider sentiment, which contradicts the opinion of hedge funds. With takeover attempts on the horizon, is it a good option to buy this stock at the moment?
Keeping this in mind, let’s take a look at the latest hedge fund action encompassing CIGNA Corporation (NYSE:CI).
Hedge fund activity in CIGNA Corporation (NYSE:CI)
At the end of the fourth quarter, 42 hedge funds were holding long positions in Cigna, but this number went up by 19% during the first quarter to 50 funds. Moreover, the aggregate value of positions held by the investors we track jumped to $229.47 million from $172.49 million during the first three months, which shows that overall hedge funds are bullish on the company.
According to Insider Monkey’s database, Richard S. Pzena’s Pzena Investment Management holds 4.7 million shares of CIGNA Corporation (NYSE:CI), worth close to $610.7 million, corresponding to 3.4% of its total 13F portfolio value. Following Pzena Investment Management is Glenview Capital, managed by Larry Robbins, with 1.8 million shares valued at $230.2 million and accounts for 1.1% of its 13F portfolio. Other hedge funds with stakes in CIGNA Corporation (NYSE:CI) include Steven Richman’s East Side Capital (RR Partners), Cliff Asness’ AQR Capital Management and Jacob Gottlieb’s Visium Asset Management.
As one would reasonably expect, several hedge funds might have opened a new position in the stock. Among the funds we track, the largest new stake was held by GMT Capital, managed by Thomas E. Claugus, which disclosed a $69.4 million position that contains 536,300 shares of the health insurance company. Following GMT Capital is Brian Taylor’s Pine River Capital Management, which acquired 456,564 shares valued at $59.1 million, according to its latest 13F filing. In addition, Zach Schreiber‘s Point State Capital, James Dondero’s Highland Capital Management, and Jerome Pfund and Michael Sjostrom’s Sectoral Asset Management were among the funds with new stakes in Cigna, according to the previous round of 13F filings.
To sum up, even though insiders have been selling shares of CIGNA Corporation (NYSE:CI) lately, hedge funds seem to be more optimistic about the company’s prospects, which will be fueled by takeover talks now. With this in mind, we suggest buying this stock with a high chance that Anthem Inc (NYSE:ANTM)’s increased bid will come through.
Disclosure: None
