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Out of thousands of stocks that are currently traded on the market, it is difficult to identify those that will really generate strong returns. Hedge funds and institutional investors spend millions of dollars on analysts with MBAs and PhDs, who are industry experts and well connected to other industry and media insiders on top of that. Individual investors can piggyback the hedge funds employing these talents and can benefit from their vast resources and knowledge in that way. We analyze quarterly 13F filings of nearly 817 hedge funds and, by looking at the smart money sentiment that surrounds a stock, we can determine whether it has the potential to beat the market over the long-term. Therefore, let’s take a closer look at what smart money thinks about Cna Financial Corporation (NYSE:CNA).
Is CNA a good stock to buy now? Prominent investors were buying. The number of long hedge fund positions rose by 5 recently. Cna Financial Corporation (NYSE:CNA) was in 17 hedge funds' portfolios at the end of the third quarter of 2020. The all time high for this statistic is 21. Our calculations also showed that CNA isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 12 hedge funds in our database with CNA holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
Why do we pay any attention at all to hedge fund sentiment? Our research has shown that a select group of hedge fund holdings outperformed the S&P 500 ETFs by 66 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 13% through November 17th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.
Steve Leonard of Pacifica Capital
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks 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. Now let's take a look at the new hedge fund action surrounding Cna Financial Corporation (NYSE:CNA).
Do Hedge Funds Think CNA Is A Good Stock To Buy Now?
At Q3's end, a total of 17 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 42% from one quarter earlier. On the other hand, there were a total of 16 hedge funds with a bullish position in CNA a year ago. With the smart money's sentiment swirling, there exists a few notable hedge fund managers who were boosting their holdings considerably (or already accumulated large positions).
The largest stake in Cna Financial Corporation (NYSE:CNA) was held by Arrowstreet Capital, which reported holding $23.7 million worth of stock at the end of September. It was followed by Renaissance Technologies with a $16.3 million position. Other investors bullish on the company included AQR Capital Management, Pacifica Capital Investments, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Pacifica Capital Investments allocated the biggest weight to Cna Financial Corporation (NYSE:CNA), around 1.78% of its 13F portfolio. Quantamental Technologies is also relatively very bullish on the stock, setting aside 0.28 percent of its 13F equity portfolio to CNA.
As industrywide interest jumped, key money managers have jumped into Cna Financial Corporation (NYSE:CNA) headfirst. Holocene Advisors, managed by Brandon Haley, created the most outsized position in Cna Financial Corporation (NYSE:CNA). Holocene Advisors had $1 million invested in the company at the end of the quarter. Mika Toikka's AlphaCrest Capital Management also initiated a $0.4 million position during the quarter. The following funds were also among the new CNA investors: Michael Gelband's ExodusPoint Capital, Ran Pang's Quantamental Technologies, and D. E. Shaw's D E Shaw.
Let's check out hedge fund activity in other stocks - not necessarily in the same industry as Cna Financial Corporation (NYSE:CNA) but similarly valued. These stocks are Westlake Chemical Corporation (NYSE:WLK), Gaming and Leisure Properties Inc (NASDAQ:GLPI), Bill.com Holdings, Inc. (NYSE:BILL), BorgWarner Inc. (NYSE:BWA), Snap-on Incorporated (NYSE:SNA), Dropbox, Inc. (NASDAQ:DBX), and Melco Resorts & Entertainment Limited (NASDAQ:MLCO). This group of stocks' market caps are closest to CNA's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position WLK,26,148658,-3 GLPI,30,634369,-5 BILL,44,1554533,-8 BWA,30,797912,-5 SNA,24,407096,4 DBX,43,992075,-8 MLCO,34,823821,2 Average,33,765495,-3.3 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 33 hedge funds with bullish positions and the average amount invested in these stocks was $765 million. That figure was $60 million in CNA's case. Bill.com Holdings, Inc. (NYSE:BILL) is the most popular stock in this table. On the other hand Snap-on Incorporated (NYSE:SNA) is the least popular one with only 24 bullish hedge fund positions. Compared to these stocks Cna Financial Corporation (NYSE:CNA) is even less popular than SNA. Our overall hedge fund sentiment score for CNA is 34.3. 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. Hedge funds clearly dropped the ball on CNA as the stock delivered strong returns, though hedge funds' consensus picks still generated respectable returns. 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 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. A small number of hedge funds were also right about betting on CNA as the stock returned 26% since Q3 (through December 14th) and outperformed the market by an even larger margin.
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Disclosure: None. This article was originally published at Insider Monkey.