Stocks, especially the once high flying technology stocks, had a lousy start to the new year. QQQ lost 9% of its value in January. We aren’t certain about the bubbly technology stocks that trade for ridiculously high multiples of their revenues, but we believe top hedge fund stocks will deliver positive returns for the rest of the year. In this article, we will take a closer look at hedge fund sentiment towards Centene Corporation (NYSE:CNC) at the end of the third quarter and determine whether the smart money was really smart about this stock.
Centene Corporation (NYSE:CNC) was in 50 hedge funds’ portfolios at the end of September. The all time high for this statistic is 71. CNC investors should pay attention to an increase in enthusiasm from smart money lately. There were 49 hedge funds in our database with CNC positions at the end of the second quarter. Our calculations also showed that CNC isn’t among the 30 most popular stocks among hedge funds (click for Q3 rankings).
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. Keeping this in mind we’re going to review the latest hedge fund action encompassing Centene Corporation (NYSE:CNC).
Alex Litowitz of Magnetar Capital
Do Hedge Funds Think CNC Is A Good Stock To Buy Now?
At Q3’s end, a total of 50 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 2% from the previous quarter. By comparison, 58 hedge funds held shares or bullish call options in CNC a year ago. With hedgies’ sentiment swirling, there exists a select group of notable hedge fund managers who were adding to their holdings meaningfully (or already accumulated large positions).
The largest stake in Centene Corporation (NYSE:CNC) was held by Viking Global, which reported holding $615.9 million worth of stock at the end of September. It was followed by Farallon Capital with a $284.9 million position. Other investors bullish on the company included Maverick Capital, Lyrical Asset Management, and Glenview Capital. In terms of the portfolio weights assigned to each position Dendur Capital allocated the biggest weight to Centene Corporation (NYSE:CNC), around 10.26% of its 13F portfolio. Dendur Capital is also relatively very bullish on the stock, setting aside 5.12 percent of its 13F equity portfolio to CNC.
Now, some big names were leading the bulls’ herd. Dendur Capital, managed by Malcolm Levine, initiated the most outsized call position in Centene Corporation (NYSE:CNC). Dendur Capital had $68.5 million invested in the company at the end of the quarter. Arthur B Cohen and Joseph Healey’s Healthcor Management LP also initiated a $61.2 million position during the quarter. The other funds with brand new CNC positions are Alec Litowitz and Ross Laser’s Magnetar Capital, Malcolm Levine’s Dendur Capital, and Joseph Samuels’s Islet Management.
Let’s also examine hedge fund activity in other stocks – not necessarily in the same industry as Centene Corporation (NYSE:CNC) but similarly valued. These stocks are CRH PLC (NYSE:CRH), General Mills, Inc. (NYSE:GIS), SBA Communications Corporation (NASDAQ:SBAC), Yum! Brands, Inc. (NYSE:YUM), Cloudflare, Inc. (NYSE:NET), Mizuho Financial Group Inc. (NYSE:MFG), and Robinhood Markets Inc. (NASDAQ:HOOD). This group of stocks’ market values are closest to CNC’s market value.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| CRH | 7 | 83127 | -2 |
| GIS | 32 | 731647 | -5 |
| SBAC | 36 | 1893871 | -7 |
| YUM | 38 | 757636 | 3 |
| NET | 50 | 958432 | 7 |
| MFG | 6 | 13164 | 0 |
| HOOD | 20 | 4685841 | 20 |
| Average | 27 | 1303388 | 2.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 27 hedge funds with bullish positions and the average amount invested in these stocks was $1303 million. That figure was $2431 million in CNC’s case. Cloudflare, Inc. (NYSE:NET) is the most popular stock in this table. On the other hand Mizuho Financial Group Inc. (NYSE:MFG) is the least popular one with only 6 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 77.1. 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. 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 still beat the market by 3.6 percentage points. Hedge funds were also right about betting on CNC as the stock returned 24.8% since the end of Q3 (through 1/31) and outperformed the market. Hedge funds were rewarded for their relative bullishness.
Follow Centene Corp (NYSE:CNC)
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Disclosure: None. This article was originally published at Insider Monkey.
