Were Hedge Funds Right About Cigna Corporation (CI)?

In this article we will take a look at whether hedge funds think Cigna Corporation (NYSE:CI) is a good investment right now. We check hedge fund and billionaire investor sentiment before delving into hours of research. Hedge funds spend millions of dollars on Ivy League graduates, unconventional data sources, expert networks, and get tips from investment bankers and industry insiders. Sure they sometimes fail miserably, but their consensus stock picks historically outperformed the market after adjusting for known risk factors.

Cigna Corporation (NYSE:CI) has seen a decrease in support from the world’s most elite money managers in recent months. Cigna Corporation (NYSE:CI) was in 72 hedge funds’ portfolios at the end of the second quarter of 2020. The all time high for this statistics is 76. Our calculations also showed that CI isn’t among the 30 most popular stocks among hedge funds (click for Q2 rankings and see the video for a quick look at the top 5 stocks).

Video: Watch our video about the top 5 most popular hedge fund stocks.

Hedge funds’ reputation as shrewd investors has been tarnished in the last decade as their hedged returns couldn’t keep up with the unhedged returns of the market indices. Our research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 56 percentage points since March 2017 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that’ll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 34% through August 17th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

Michael Lowenstein of Kensico Capital

At Insider Monkey we scour multiple sources to uncover the next great investment idea. Hedge fund sentiment towards Tesla reached its all time high at the end of 2019 and Tesla shares more than quadrupled this year. We are trying to identify other EV revolution winners, so we are checking out this under-the-radar lithium stock. We go through lists like the 10 most profitable companies in the world to pick the best large-cap stocks to buy. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our website to get excerpts of these letters in your inbox. With all of this in mind let’s take a glance at the fresh hedge fund action surrounding Cigna Corporation (NYSE:CI).

Hedge fund activity in Cigna Corporation (NYSE:CI)

At the end of the second quarter, a total of 72 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -3% from the first quarter of 2020. On the other hand, there were a total of 48 hedge funds with a bullish position in CI a year ago. So, let’s review which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

The largest stake in Cigna Corporation (NYSE:CI) was held by Viking Global, which reported holding $553.5 million worth of stock at the end of September. It was followed by BloombergSen with a $277 million position. Other investors bullish on the company included Kensico Capital, Glenview Capital, and Lakewood Capital Management. In terms of the portfolio weights assigned to each position BloombergSen allocated the biggest weight to Cigna Corporation (NYSE:CI), around 19.19% of its 13F portfolio. Solel Partners is also relatively very bullish on the stock, designating 19.13 percent of its 13F equity portfolio to CI.

Due to the fact that Cigna Corporation (NYSE:CI) has witnessed declining sentiment from the entirety of the hedge funds we track, it’s safe to say that there was a specific group of money managers that decided to sell off their entire stakes in the second quarter. It’s worth mentioning that Christopher James’s Partner Fund Management said goodbye to the biggest position of all the hedgies watched by Insider Monkey, comprising an estimated $34.5 million in stock, and Alok Agrawal’s Bloom Tree Partners was right behind this move, as the fund dumped about $29.5 million worth. These moves are interesting, as aggregate hedge fund interest fell by 2 funds in the second quarter.

Let’s go over hedge fund activity in other stocks – not necessarily in the same industry as Cigna Corporation (NYSE:CI) but similarly valued. These stocks are Prologis Inc (NYSE:PLD), Caterpillar Inc. (NYSE:CAT), Dominion Energy Inc. (NYSE:D), The Goldman Sachs Group, Inc. (NYSE:GS), The Estee Lauder Companies Inc (NYSE:EL), The Blackstone Group Inc. (NYSE:BX), and Stryker Corporation (NYSE:SYK). This group of stocks’ market values are similar to CI’s market value.

View table here if you experience formatting issues.

As you can see these stocks had an average of 45.6 hedge funds with bullish positions and the average amount invested in these stocks was $1557 million. That figure was $2871 million in CI’s case. The Goldman Sachs Group, Inc. (NYSE:GS) is the most popular stock in this table. On the other hand Dominion Energy Inc. (NYSE:D) is the least popular one with only 33 bullish hedge fund positions. Compared to these stocks Cigna Corporation (NYSE:CI) is more popular among hedge funds. Our overall hedge fund sentiment score for CI is 81.4. 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. Our calculations showed that top 10 most popular stocks among hedge funds returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 29.2% in 2020 through October 16th and still beat the market by 19.7 percentage points. Unfortunately CI wasn’t nearly as popular as these 10 stocks and hedge funds that were betting on CI were disappointed as the stock returned -5.2% since the end of the second quarter (through 10/16) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 10 most popular stocks among hedge funds as most of these stocks already outperformed the market in 2020.

Disclosure: None. This article was originally published at Insider Monkey.