Like everyone else, elite investors make mistakes. Some of their top consensus picks, such as Amazon, Facebook and Alibaba, have not done well in Q4 due to various reasons. Nevertheless, the data show elite investors’ consensus picks have done well on average over the long-term. The top 15 S&P 500 stocks among hedge funds at the end of September 2018 returned an average of 1% through March 15th whereas the S&P 500 Index ETF lost 2.2% during the same period. Because their consensus picks have done well, we pay attention to what elite funds think before doing extensive research on a stock. In this article, we take a closer look at CIGNA Corporation (NYSE:CI) from the perspective of those elite funds.
CIGNA Corporation (NYSE:CI) was in 68 hedge funds’ portfolios at the end of December. CI investors should pay attention to an increase in enthusiasm from smart money lately. There were 60 hedge funds in our database with CI holdings at the end of the previous quarter. Our calculations also showed that CI isn’t among the 30 most popular stocks among hedge funds.
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 market by 32 percentage points since May 2014 through March 12, 2019 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren’t comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We’re going to take a peek at the key hedge fund action regarding CIGNA Corporation (NYSE:CI).
How are hedge funds trading CIGNA Corporation (NYSE:CI)?
Heading into the first quarter of 2019, a total of 68 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 13% from the second quarter of 2018. On the other hand, there were a total of 66 hedge funds with a bullish position in CI a year ago. With hedge funds’ sentiment swirling, there exists an “upper tier” of noteworthy hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
Of the funds tracked by Insider Monkey, AQR Capital Management, managed by Cliff Asness, holds the number one position in CIGNA Corporation (NYSE:CI). AQR Capital Management has a $708.4 million position in the stock, comprising 0.8% of its 13F portfolio. The second most bullish fund manager is Glenview Capital, managed by Larry Robbins, which holds a $516.3 million position; the fund has 5% of its 13F portfolio invested in the stock. Some other hedge funds and institutional investors that hold long positions comprise Michael Lowenstein’s Kensico Capital, D. E. Shaw’s D E Shaw and Farallon Capital which is founded by Thomas Steyer.
Consequently, specific money managers were leading the bulls’ herd. Farallon Capital assembled the biggest position in CIGNA Corporation (NYSE:CI). Farallon Capital had $200.4 million invested in the company at the end of the quarter. Andy Brown’s Cedar Rock Capital also initiated a $194.3 million position during the quarter. The following funds were also among the new CI investors: Jonathan Bloomberg’s BloombergSen, Dan Loeb’s Third Point, and Christopher James’s Partner Fund Management.
Let’s also examine hedge fund activity in other stocks similar to CIGNA Corporation (NYSE:CI). We will take a look at Danaher Corporation (NYSE:DHR), ConocoPhillips (NYSE:COP), Equinor ASA (NYSE:EQNR), and American Tower Corporation (NYSE:AMT). This group of stocks’ market caps are similar to CI’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DHR | 48 | 2127751 | -3 |
| COP | 59 | 1984993 | 4 |
| EQNR | 13 | 341572 | 1 |
| AMT | 41 | 2590156 | -1 |
| Average | 40.25 | 1761118 | 0.25 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 40.25 hedge funds with bullish positions and the average amount invested in these stocks was $1761 million. That figure was $4557 million in CI’s case. ConocoPhillips (NYSE:COP) is the most popular stock in this table. On the other hand Equinor ASA (NYSE:EQNR) is the least popular one with only 13 bullish hedge fund positions. Compared to these stocks CIGNA Corporation (NYSE:CI) is more popular among hedge funds. Our calculations showed that top 15 most popular stocks among hedge funds returned 19.7% through March 15th and outperformed the S&P 500 ETF (SPY) by 6.6 percentage points. Unfortunately Cigna wasn’t in this group. Hedge funds that bet on Cigna were disappointed as the stock lost 12.3% and underperformed the market by a large margin. If you are interested in investing in large cap stocks, you should check out the top 15 hedge fund stocks as 13 of these outperformed the market.
Disclosure: None. This article was originally published at Insider Monkey.
