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Hedge Funds Are Dumping CNO Financial Group Inc (CNO)

Debasis Saha

The latest 13F reporting period has come and gone, and Insider Monkey is again at the forefront when it comes to making use of this gold mine of data. We at Insider Monkey have plowed through 821 13F filings that hedge funds and well-known value investors are required to file by the SEC. The 13F filings show the funds' and investors' portfolio positions as of March 31st, a week after the market trough. In this article we look at what those investors think of CNO Financial Group Inc (NYSE:CNO).

CNO Financial Group Inc (NYSE:CNO) investors should be aware of a decrease in hedge fund sentiment recently. CNO was in 15 hedge funds' portfolios at the end of the first quarter of 2020. There were 23 hedge funds in our database with CNO positions at the end of the previous quarter. Our calculations also showed that CNO isn't among the 30 most popular stocks among hedge funds (click for Q1 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.

To most market participants, hedge funds are perceived as slow, old investment vehicles of years past. While there are more than 8000 funds with their doors open at present, We hone in on the top tier of this group, approximately 850 funds. These investment experts control bulk of the smart money's total capital, and by watching their unrivaled stock picks, Insider Monkey has identified a number of investment strategies that have historically outperformed the broader indices. Insider Monkey's flagship short hedge fund strategy surpassed the S&P 500 short ETFs by around 20 percentage points a year since its inception in March 2017. Our portfolio of short stocks lost 36% since February 2017 (through May 18th) even though the market was up 30% during the same period. We just shared a list of 8 short targets in our latest quarterly update .

[caption id="attachment_338852" align="aligncenter" width="400"] Richard S. Pzena of Pzena Investment Management[/caption]

Richard Pzena - Pzena Investment Management

At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, blockchain technology's influence will go beyond online payments. So, we are checking out this futurist's moonshot opportunities in tech stocks. We interview hedge fund managers and ask them about their best ideas. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. For example we are checking out stocks recommended/scorned by legendary Bill Miller. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 in February after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's take a gander at the key hedge fund action regarding CNO Financial Group Inc (NYSE:CNO).

What does smart money think about CNO Financial Group Inc (NYSE:CNO)?

At Q1's end, a total of 15 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -35% from the previous quarter. On the other hand, there were a total of 13 hedge funds with a bullish position in CNO a year ago. With the smart money's positions undergoing their usual ebb and flow, there exists a select group of key hedge fund managers who were increasing their holdings significantly (or already accumulated large positions).

Is CNO A Good Stock To Buy?

The largest stake in CNO Financial Group Inc (NYSE:CNO) was held by Pzena Investment Management, which reported holding $102.8 million worth of stock at the end of September. It was followed by Paradice Investment Management with a $70.1 million position. Other investors bullish on the company included Huber Capital Management, AQR Capital Management, and Citadel Investment Group. In terms of the portfolio weights assigned to each position Paradice Investment Management allocated the biggest weight to CNO Financial Group Inc (NYSE:CNO), around 7.77% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, designating 2.66 percent of its 13F equity portfolio to CNO.

Due to the fact that CNO Financial Group Inc (NYSE:CNO) has experienced falling interest from the smart money, we can see that there exists a select few hedge funds that elected to cut their full holdings heading into Q4. At the top of the heap,  Renaissance Technologies cut the largest investment of the 750 funds monitored by Insider Monkey, totaling an estimated $4.1 million in stock, and Minhua Zhang's Weld Capital Management was right behind this move, as the fund cut about $2.7 million worth. These moves are interesting, as aggregate hedge fund interest was cut by 8 funds heading into Q4.

Let's also examine hedge fund activity in other stocks similar to CNO Financial Group Inc (NYSE:CNO). We will take a look at Vicor Corp (NASDAQ:VICR), Nelnet, Inc. (NYSE:NNI), Graham Holdings Co (NYSE:GHC), and SmileDirectClub, Inc. (NASDAQ:SDC). This group of stocks' market values match CNO's market value.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position VICR,14,31916,2 NNI,13,81943,-1 GHC,21,283866,3 SDC,20,65952,0 Average,17,115919,1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 17 hedge funds with bullish positions and the average amount invested in these stocks was $116 million. That figure was $219 million in CNO's case. Graham Holdings Co (NYSE:GHC) is the most popular stock in this table. On the other hand Nelnet, Inc. (NYSE:NNI) is the least popular one with only 13 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. 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 13.3% in 2020 through June 25th but beat the market by 16.8 percentage points. A small number of hedge funds were also right about betting on CNO, though not to the same extent, as the stock returned 26.1% during the second quarter and outperformed the market.

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

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