Hedge Fund Sentiment Is Stagnant On CNO Financial Group Inc (CNO)

We know that hedge funds generate strong, risk-adjusted returns over the long run, therefore imitating the picks that they are collectively bullish on can be a profitable strategy for retail investors. With billions of dollars in assets, smart money investors have to conduct complex analyses, spend many resources and use tools that are not always available for the general crowd. This doesn’t mean that they don’t have occasional colossal losses; they do (like Melvin Capital’s recent GameStop losses). However, it is still a good idea to keep an eye on hedge fund activity. With this in mind, as the current round of 13F filings has just ended, let’s examine the smart money sentiment towards CNO Financial Group Inc (NYSE:CNO).

CNO Financial Group Inc (NYSE:CNO) shares haven’t seen a lot of action during the second quarter. Overall, hedge fund sentiment was unchanged. The stock was in 21 hedge funds’ portfolios at the end of the third quarter of 2021. Our calculations also showed that CNO isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). At the end of this article we will also compare CNO to other stocks including Werner Enterprises, Inc. (NASDAQ:WERN), Lions Gate Entertainment Corporation (NYSE:LGF-B), and Axonics, Inc. (NASDAQ:AXNX) to get a better sense of its popularity.

At Insider Monkey, we scour multiple sources to uncover the next great investment idea. For example, lithium prices have more than doubled over the past year, so 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. With all of this in mind we’re going to take a look at the new hedge fund action surrounding CNO Financial Group Inc (NYSE:CNO).

Richard S. Pzena of Pzena Investment Management

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

At third quarter’s end, a total of 21 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 0% from one quarter earlier. By comparison, 19 hedge funds held shares or bullish call options in CNO a year ago. With hedge funds’ sentiment swirling, there exists a select group of notable hedge fund managers who were upping their holdings meaningfully (or already accumulated large positions).

Among these funds, Pzena Investment Management held the most valuable stake in CNO Financial Group Inc (NYSE:CNO), which was worth $159.8 million at the end of the third quarter. On the second spot was Paradice Investment Management which amassed $108.2 million worth of shares. Arrowstreet Capital, AQR Capital Management, and Royce & Associates 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 Paradice Investment Management allocated the biggest weight to CNO Financial Group Inc (NYSE:CNO), around 4.9% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, earmarking 3.05 percent of its 13F equity portfolio to CNO.

Due to the fact that CNO Financial Group Inc (NYSE:CNO) has faced falling interest from the smart money, it’s safe to say that there was a specific group of money managers who were dropping their full holdings in the third quarter. At the top of the heap, Donald Sussman’s Paloma Partners sold off the largest investment of all the hedgies monitored by Insider Monkey, totaling close to $0.4 million in stock. Renee Yao’s fund, Neo Ivy Capital, also dumped its stock, about $0.3 million worth. These transactions are interesting, as aggregate hedge fund interest stayed the same (this is a bearish signal in our experience).

Let’s now take a look at hedge fund activity in other stocks – not necessarily in the same industry as CNO Financial Group Inc (NYSE:CNO) but similarly valued. These stocks are Werner Enterprises, Inc. (NASDAQ:WERN), Lions Gate Entertainment Corporation (NYSE:LGF-B), Axonics, Inc. (NASDAQ:AXNX), Signify Health, Inc. (NYSE:SGFY), Ameresco Inc (NYSE:AMRC), Zentalis Pharmaceuticals, Inc. (NASDAQ:ZNTL), and Kymera Therapeutics, Inc. (NASDAQ:KYMR). This group of stocks’ market valuations match CNO’s market valuation.

View table here if you experience formatting issues.

As you can see these stocks had an average of 18 hedge funds with bullish positions and the average amount invested in these stocks was $378 million. That figure was $357 million in CNO’s case. Lions Gate Entertainment Corporation (NYSE:LGF-B) is the most popular stock in this table. On the other hand Axonics, Inc. (NASDAQ:AXNX) is the least popular one with only 14 bullish hedge fund positions. CNO Financial Group Inc (NYSE:CNO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNO is 67.4. 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 29.6% in 2021 and beat the market again by 3.6 percentage points. Unfortunately CNO wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CNO were disappointed as the stock returned 1.8% since the end of September (through 12/31) 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.