“Market volatility has picked up again over the past few weeks. Headlines highlight risks regarding interest rates, the Fed, China, house prices, auto sales, trade wars, and more. Uncertainty abounds. But doesn’t it always? I have no view on whether the recent volatility will continue for a while, or whether the market will be back at all-time highs before we know it. I remain focused on preserving and growing our capital and continue to believe that the best way to do so is via a value-driven, concentrated, patient approach. I shun consensus holdings, rich valuations, and market fads, in favor of solid, yet frequently off-the-beaten-path, businesses run by excellent, aligned management teams, purchased at deep discounts to intrinsic value,” are the words of Maran Capital’s Dan Roller. His stock picks have been beating the S&P 500 Index handily. We pay attention to what hedge funds are doing in a particular stock before considering a potential investment because it works for us. So let’s take a glance at the smart money sentiment towards CIGNA Corporation (NYSE:CI) and see how it was affected.
CIGNA Corporation (NYSE:CI) investors should pay attention to an increase in hedge fund interest lately. CI was in 60 hedge funds’ portfolios at the end of the third quarter of 2018. There were 49 hedge funds in our database with CI positions at the end of the previous quarter. Our calculations also showed that CI isn’t among the 30 most popular stocks among hedge funds.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds’ large-cap stock picks indeed failed to the beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (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 24% through December 3, 2018. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Cliff Asness of AQR Capital Management
Let’s view the latest hedge fund action encompassing CIGNA Corporation (NYSE:CI).
How are hedge funds trading CIGNA Corporation (NYSE:CI)?
Heading into the fourth quarter of 2018, a total of 60 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 22% from the second quarter of 2018. Below, you can check out the change in hedge fund sentiment towards CI over the last 13 quarters. So, let’s find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Among these funds, AQR Capital Management held the most valuable stake in CIGNA Corporation (NYSE:CI), which was worth $627.3 million at the end of the third quarter. On the second spot was Arrowstreet Capital which amassed $386.5 million worth of shares. Moreover, Partner Fund Management, DE Shaw, and Two Sigma Advisors were also bullish on CIGNA Corporation (NYSE:CI), allocating a large percentage of their portfolios to this stock.
Now, key hedge funds were leading the bulls’ herd. Partner Fund Management, managed by Christopher James, initiated the most outsized call position in CIGNA Corporation (NYSE:CI). Partner Fund Management had $294.1 million invested in the company at the end of the quarter. Arthur B Cohen and Joseph Healey’s Healthcor Management LP also made a $125 million investment in the stock during the quarter. The following funds were also among the new CI investors: Jeremy Green’s Redmile Group, Alok Agrawal’s Bloom Tree Partners, and Larry Robbins’s Glenview Capital.
Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as CIGNA Corporation (NYSE:CI) but similarly valued. These stocks are Norfolk Southern Corp. (NYSE:NSC), ING Groep N.V. (NYSE:ING), ABB Ltd (NYSE:ABB), and Vertex Pharmaceuticals Incorporated (NASDAQ:VRTX). All of these stocks’ market caps are closest to CI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| NSC | 49 | 2089375 | 7 |
| ING | 8 | 596028 | 0 |
| ABB | 11 | 288966 | -7 |
| VRTX | 41 | 2595323 | -4 |
| Average | 27.25 | 1392 | -1 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27.25 hedge funds with bullish positions and the average amount invested in these stocks was $1392 million. That figure was $3545 million in CI’s case. Norfolk Southern Corp. (NYSE:NSC) is the most popular stock in this table. On the other hand, ING Groep N.V. (NYSE:ING) is the least popular one with only 8 bullish hedge fund positions. Compared to these stocks CIGNA Corporation (NYSE:CI) is more popular among hedge funds. Considering that hedge funds are fond of this stock in relation to its market cap peers, it may be a good idea to analyze it in detail and potentially include it in your portfolio.
Disclosure: None. This article was originally published at Insider Monkey.
