Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow over 700 of the best-performing investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is CNO Financial Group Inc (NYSE:CNO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
So, why do we pay attention to hedge fund sentiment before making any investment decisions? Our research has shown that hedge funds' small-cap stock picks managed to beat the market by double digits annually between 1999 and 2016, but the margin of outperformance has been declining in recent years. Nevertheless, we were still able to identify in advance a select group of hedge fund holdings that outperformed the market by 18 percentage points since May 2014 through December 3, 2018 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that underperformed the market by 10 percentage points annually between 2006 and 2017. Interestingly the margin of underperformance of these stocks has been increasing in recent years. Investors who are long the market and short these stocks would have returned more than 27% annually between 2015 and 2017. We have been tracking and sharing the list of these stocks since February 2017 in our quarterly newsletter. Even if you aren't comfortable with shorting stocks, you should at least avoid initiating long positions in our short portfolio.
We're going to check out the latest hedge fund action encompassing CNO Financial Group Inc (NYSE:CNO).
What does the smart money think about CNO Financial Group Inc (NYSE:CNO)?
Heading into the fourth quarter of 2018, a total of 14 of the hedge funds tracked by Insider Monkey were long this stock, a change of -18% from one quarter earlier. On the other hand, there were a total of 12 hedge funds with a bullish position in CNO at the beginning of this year. So, let's see which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
Of the funds tracked by Insider Monkey, Huber Capital Management, managed by Joe Huber, holds the largest position in CNO Financial Group Inc (NYSE:CNO). Huber Capital Management has a $44 million position in the stock, comprising 2.8% of its 13F portfolio. On Huber Capital Management's heels is AQR Capital Management, led by Cliff Asness, holding a $39.8 million position; less than 0.1%% of its 13F portfolio is allocated to the stock. Some other peers with similar optimism contain Noam Gottesman's GLG Partners, Israel Englander's Millennium Management and Jim Simons's Renaissance Technologies.
Because CNO Financial Group Inc (NYSE:CNO) has witnessed declining sentiment from hedge fund managers, it's easy to see that there was a specific group of hedge funds that elected to cut their full holdings by the end of the third quarter. Intriguingly, Peter Seuss's Prana Capital Management dropped the biggest position of the 700 funds tracked by Insider Monkey, comprising an estimated $5.6 million in stock. Peter Rathjens, Bruce Clarke and John Campbell's fund, Arrowstreet Capital, also dropped its stock, about $5.3 million worth. These bearish behaviors are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds by the end of the third quarter.
Let's check out hedge fund activity in other stocks similar to CNO Financial Group Inc (NYSE:CNO). We will take a look at Crescent Point Energy Corp (NYSE:CPG), CVR Energy, Inc. (NYSE:CVI), Performance Food Group Company (NYSE:PFGC), and John Wiley & Sons Inc (NYSE:JW). All of these stocks' market caps match CNO's market cap.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position CPG,12,61886,0 CVI,21,3056087,3 PFGC,23,225495,5 JW,15,138842,-7 Average,17.75,870578,0.25 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 17.75 hedge funds with bullish positions and the average amount invested in these stocks was $871 million. That figure was $144 million in CNO's case. Performance Food Group Company (NYSE:PFGC) is the most popular stock in this table. On the other hand Crescent Point Energy Corp (NYSE:CPG) is the least popular one with only 12 bullish hedge fund positions. CNO Financial Group Inc (NYSE:CNO) is not the least popular stock in this group but hedge fund interest is still below average. This is a slightly negative signal and we'd rather spend our time researching stocks that hedge funds are piling on. In this regard PFGC might be a better candidate to consider a long position.
Disclosure: None. This article was originally published at Insider Monkey.