While the market driven by short-term sentiment influenced by the accommodative interest rate environment in the US, virus news and stimulus spending, many smart money investors are starting to get cautious towards the current bull run since March, 2020 and hedging or reducing many of their long positions. Some fund managers are betting on Dow hitting 40,000 to generate strong returns. However, as we know, big investors usually buy stocks with strong fundamentals that can deliver gains both in bull and bear markets, which is why we believe we can profit from imitating them. In this article, we are going to take a look at the smart money sentiment surrounding Centene Corporation (NYSE:CNC).
Is Centene Corporation (NYSE:CNC) a buy right now? The best stock pickers were turning less bullish. The number of long hedge fund bets shrunk by 4 recently. Centene Corporation (NYSE:CNC) was in 49 hedge funds’ portfolios at the end of June. The all time high for this statistic is 71. Our calculations also showed that CNC isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings). There were 53 hedge funds in our database with CNC holdings at the end of March.
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Ole Andreas Halvorsen of Viking Global
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Do Hedge Funds Think CNC Is A Good Stock To Buy Now?
At the end of June, a total of 49 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from one quarter earlier. The graph below displays the number of hedge funds with bullish position in CNC over the last 24 quarters. With hedge funds’ capital changing hands, there exists an “upper tier” of notable hedge fund managers who were increasing their stakes meaningfully (or already accumulated large positions).
More specifically, Viking Global was the largest shareholder of Centene Corporation (NYSE:CNC), with a stake worth $816.8 million reported as of the end of June. Trailing Viking Global was Farallon Capital, which amassed a stake valued at $346.4 million. Southpoint Capital Advisors, Maverick Capital, and Lyrical Asset 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 Southpoint Capital Advisors allocated the biggest weight to Centene Corporation (NYSE:CNC), around 4.42% of its 13F portfolio. Bridger Management is also relatively very bullish on the stock, dishing out 4.29 percent of its 13F equity portfolio to CNC.
Judging by the fact that Centene Corporation (NYSE:CNC) has witnessed a decline in interest from the aggregate hedge fund industry, it’s easy to see that there exists a select few money managers that elected to cut their positions entirely last quarter. At the top of the heap, Steve Cohen’s Point72 Asset Management dumped the largest investment of the “upper crust” of funds monitored by Insider Monkey, worth about $86.9 million in stock, and Alec Litowitz and Ross Laser’s Magnetar Capital was right behind this move, as the fund said goodbye to about $17.7 million worth. These moves are intriguing to say the least, as total hedge fund interest dropped by 4 funds last quarter.
Let’s check out hedge fund activity in other stocks similar to Centene Corporation (NYSE:CNC). We will take a look at Digital Realty Trust, Inc. (NYSE:DLR), American Electric Power Company, Inc. (NASDAQ:AEP), Carrier Global Corporation (NYSE:CARR), Synopsys, Inc. (NASDAQ:SNPS), Telefonaktiebolaget LM Ericsson (publ) (NASDAQ:ERIC), Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA), and DexCom, Inc. (NASDAQ:DXCM). This group of stocks’ market valuations resemble CNC’s market valuation.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| DLR | 30 | 424723 | 8 |
| AEP | 29 | 726241 | -3 |
| CARR | 46 | 1853633 | -5 |
| SNPS | 41 | 2057258 | 7 |
| ERIC | 19 | 228837 | 0 |
| BBVA | 9 | 274525 | 2 |
| DXCM | 49 | 1634192 | -7 |
| Average | 31.9 | 1028487 | 0.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 31.9 hedge funds with bullish positions and the average amount invested in these stocks was $1028 million. That figure was $3240 million in CNC’s case. DexCom, Inc. (NASDAQ:DXCM) is the most popular stock in this table. On the other hand Banco Bilbao Vizcaya Argentaria SA (NYSE:BBVA) is the least popular one with only 9 bullish hedge fund positions. Centene Corporation (NYSE:CNC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNC is 71.7. 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 through November 5th and beat the market again by 3.1 percentage points. Unfortunately CNC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on CNC were disappointed as the stock returned 1.7% since the end of June (through 11/5) 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.
