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Hedge Funds Have Never Been This Bullish On Centene Corporation (CNC)

Insider Monkey has processed numerous 13F filings of hedge funds and successful value investors to create an extensive database of hedge fund holdings. The 13F filings show the hedge funds' and successful investors' positions as of the end of the first quarter. You can find articles about an individual hedge fund's trades on numerous financial news websites. However, in this article we will take a look at their collective moves over the last 4.5 years and analyze what the smart money thinks of Centene Corporation (NYSE:CNC) based on that data.

Centene Corporation (NYSE:CNC) has seen an increase in hedge fund sentiment lately. CNC was in 66 hedge funds' portfolios at the end of March. There were 62 hedge funds in our database with CNC positions at the end of the previous quarter. Our calculations also showed that CNC 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.

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 44 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 36% through May 18th. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_26082" align="aligncenter" width="400"]

Andreas Halvorsen
Andreas Halvorsen

Andreas Halvorsen of Viking Global[/caption]

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, Europe is set to become the world’s largest cannabis market, so we checked out this European marijuana stock pitch. Also, we are still not out of the woods in terms of the coronavirus pandemic. So, we checked out this analyst’s “corona catalyst plays“. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. Our best call in 2020 was shorting the market when the S&P 500 was trading at 3150 after realizing the coronavirus pandemic’s significance before most investors. Keeping this in mind let's analyze the recent hedge fund action regarding Centene Corporation (NYSE:CNC).

What have hedge funds been doing with Centene Corporation (NYSE:CNC)?

At Q1's end, a total of 66 of the hedge funds tracked by Insider Monkey were long this stock, a change of 6% from the fourth quarter of 2019. On the other hand, there were a total of 58 hedge funds with a bullish position in CNC 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.

Among these funds, Viking Global held the most valuable stake in Centene Corporation (NYSE:CNC), which was worth $964.3 million at the end of the third quarter. On the second spot was Farallon Capital which amassed $430.7 million worth of shares. Third Point, Lyrical Asset Management, and Southpoint Capital Advisors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Tavio Capital allocated the biggest weight to Centene Corporation (NYSE:CNC), around 17.6% of its 13F portfolio. Courage Capital is also relatively very bullish on the stock, setting aside 10.74 percent of its 13F equity portfolio to CNC.

Consequently, specific money managers were breaking ground themselves. Farallon Capital, founded by Thomas Steyer, assembled the most outsized position in Centene Corporation (NYSE:CNC). Farallon Capital had $430.7 million invested in the company at the end of the quarter. Samuel Isaly's OrbiMed Advisors also initiated a $79.4 million position during the quarter. The other funds with brand new CNC positions are Steve Cohen's Point72 Asset Management, Kevin D. Eng's Columbus Hill Capital Management, and Patrick Degorce's Theleme Partners.

Let's go over hedge fund activity in other stocks similar to Centene Corporation (NYSE:CNC). These stocks are Baidu, Inc. (NASDAQ:BIDU), Infosys Limited (NYSE:INFY), Public Storage (NYSE:PSA), and Autodesk, Inc. (NASDAQ:ADSK). This group of stocks' market valuations resemble CNC's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position BIDU,49,2234830,-11 INFY,27,970629,2 PSA,27,807200,0 ADSK,65,2597838,1 Average,42,1652624,-2 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 42 hedge funds with bullish positions and the average amount invested in these stocks was $1653 million. That figure was $3533 million in CNC's case. Autodesk, Inc. (NASDAQ:ADSK) is the most popular stock in this table. On the other hand Infosys Limited (NYSE:INFY) is the least popular one with only 27 bullish hedge fund positions. Compared to these stocks Centene Corporation (NYSE:CNC) is more popular among hedge funds. 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 7.9% in 2020 through May 22nd and still beat the market by 15.6 percentage points. Unfortunately CNC wasn't nearly as popular as these 10 stocks and hedge funds that were betting on CNC were disappointed as the stock returned 9.1% during the second quarter (through May 22nd) 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.

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