We hate to say this but, we told you so. On February 27th we published an article with the title Recession is Imminent: We Need A Travel Ban NOW and predicted a US recession when the S&P 500 Index was trading at the 3150 level. We also told you to short the market and buy long-term Treasury bonds. Our article also called for a total international travel ban. While we were warning you, President Trump minimized the threat and failed to act promptly. As a result of his inaction, we will now experience a deeper recession (see why hell is coming).
In these volatile markets we scrutinize hedge fund filings to get a reading on which direction each stock might be going. With the first-quarter round of 13F filings behind us it is time to take a look at the stocks in which some of the best money managers in the world preferred to invest or sell heading into the first quarter. One of these stocks was CNO Financial Group Inc (NYSE:CNO).
Is CNO Financial Group Inc (NYSE:CNO) going to take off soon? Investors who are in the know are becoming hopeful. The number of bullish hedge fund bets inched up by 3 recently. Our calculations also showed that CNO isn’t among the 30 most popular stocks among hedge funds (click for Q4 rankings and see the video at the end of this article for Q3 rankings).
To most stock holders, hedge funds are assumed to be slow, old financial vehicles of the past. While there are more than 8000 funds trading at present, Our experts hone in on the leaders of this group, approximately 850 funds. These money managers command bulk of all hedge funds’ total capital, and by keeping an eye on their top stock picks, Insider Monkey has spotted several investment strategies that have historically outpaced the S&P 500 index. Insider Monkey’s flagship short hedge fund strategy outstripped the S&P 500 short ETFs by around 20 percentage points annually since its inception in March 2017. Our portfolio of short stocks lost 35.3% since February 2017 (through March 3rd) even though the market was up more than 35% during the same period. We just shared a list of 7 short targets in our latest quarterly update .
Joe Huber of Huber Capital Management
We leave no stone unturned when looking for the next great investment idea. For example we recently identified a stock that trades 25% below the net cash on its balance sheet. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences, and go through short-term trade recommendations like this one. We even check out the recommendations of services with hard to believe track records. Our best call in 2020 was shorting the market when S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let’s take a look at the fresh hedge fund action regarding CNO Financial Group Inc (NYSE:CNO).
Hedge fund activity in CNO Financial Group Inc (NYSE:CNO)
At Q4’s end, a total of 23 of the hedge funds tracked by Insider Monkey were long this stock, a change of 15% from the third quarter of 2019. On the other hand, there were a total of 11 hedge funds with a bullish position in CNO a year ago. So, let’s examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of CNO Financial Group Inc (NYSE:CNO), with a stake worth $122.8 million reported as of the end of September. Trailing Pzena Investment Management was Paradice Investment Management, which amassed a stake valued at $99.6 million. Millennium Management, Huber Capital Management, and AQR 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 Paradice Investment Management allocated the biggest weight to CNO Financial Group Inc (NYSE:CNO), around 6.93% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, dishing out 3.07 percent of its 13F equity portfolio to CNO.
Consequently, key hedge funds were leading the bulls’ herd. Point72 Asset Management, managed by Steve Cohen, created the largest position in CNO Financial Group Inc (NYSE:CNO). Point72 Asset Management had $2.5 million invested in the company at the end of the quarter. Benjamin A. Smith’s Laurion Capital Management also made a $0.7 million investment in the stock during the quarter. The other funds with new positions in the stock are Gavin Saitowitz and Cisco J. del Valle’s Springbok Capital, Peter Muller’s PDT Partners, and Schonfeld Strategic Advisors.
Let’s also examine 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 Audentes Therapeutics, Inc. (NASDAQ:BOLD), Main Street Capital Corporation (NYSE:MAIN), MGE Energy, Inc. (NASDAQ:MGEE), and First Interstate Bancsystem Inc (NASDAQ:FIBK). This group of stocks’ market valuations match CNO’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| BOLD | 47 | 1009425 | 21 |
| MAIN | 9 | 18678 | 4 |
| MGEE | 9 | 43218 | -5 |
| FIBK | 12 | 58971 | 2 |
| Average | 19.25 | 282573 | 5.5 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 19.25 hedge funds with bullish positions and the average amount invested in these stocks was $283 million. That figure was $337 million in CNO’s case. Audentes Therapeutics, Inc. (NASDAQ:BOLD) is the most popular stock in this table. On the other hand Main Street Capital Corporation (NYSE:MAIN) is the least popular one with only 9 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. 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 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 17.4% in 2020 through March 25th but beat the market by 5.5 percentage points. Unfortunately CNO wasn’t nearly as popular as these 20 stocks and hedge funds that were betting on CNO were disappointed as the stock returned -28.5% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as many of these stocks already outperformed the market so far this year.
Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.
Disclosure: None. This article was originally published at Insider Monkey.
