The latest 13F reporting period has come and gone, and 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. Now, we are almost done with the second quarter. Investors decided to bet on the economic recovery and a stock market rebound. S&P 500 Index returned almost 20% this quarter. In this article you are going to find out whether hedge funds thoughtCna Financial Corporation (NYSE:CNA) was a good investment heading into the second quarter and how the stock traded in comparison to the top hedge fund picks.
Cna Financial Corporation (NYSE:CNA) has experienced a decrease in support from the world's most elite money managers of late. Our calculations also showed that CNA 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.
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 58 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_758416" align="aligncenter" width="380"] Steve Leonard of Pacifica Capital[/caption]
At Insider Monkey we scour multiple sources to uncover the next great investment idea. There is a lot of volatility in the markets and this presents amazing investment opportunities from time to time. For example, this trader claims to deliver juiced up returns with one trade a week, so we are checking out his highest conviction idea. A second trader claims to score lucrative profits by utilizing a "weekend trading strategy", so we look into his strategy's picks. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We recently recommended several stocks partly inspired by legendary Bill Miller's investor letter. 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 view the latest hedge fund action regarding Cna Financial Corporation (NYSE:CNA).
How are hedge funds trading Cna Financial Corporation (NYSE:CNA)?
At Q1's end, a total of 12 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of -20% from one quarter earlier. By comparison, 14 hedge funds held shares or bullish call options in CNA a year ago. With the smart money's sentiment swirling, there exists a few key hedge fund managers who were adding to their stakes meaningfully (or already accumulated large positions).
More specifically, Renaissance Technologies was the largest shareholder of Cna Financial Corporation (NYSE:CNA), with a stake worth $34.5 million reported as of the end of September. Trailing Renaissance Technologies was Citadel Investment Group, which amassed a stake valued at $5 million. AQR Capital Management, Pacifica Capital Investments, and Levin Capital Strategies 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 Pacifica Capital Investments allocated the biggest weight to Cna Financial Corporation (NYSE:CNA), around 1.38% of its 13F portfolio. Levin Capital Strategies is also relatively very bullish on the stock, earmarking 0.26 percent of its 13F equity portfolio to CNA.
Due to the fact that Cna Financial Corporation (NYSE:CNA) has experienced declining sentiment from the smart money, it's easy to see that there exists a select few money managers that decided to sell off their positions entirely last quarter. Intriguingly, Israel Englander's Millennium Management sold off the biggest stake of all the hedgies monitored by Insider Monkey, worth about $4.1 million in stock. Mika Toikka's fund, AlphaCrest Capital Management, also dropped its stock, about $0.6 million worth. These transactions are intriguing to say the least, as aggregate hedge fund interest was cut by 3 funds last quarter.
Let's now review hedge fund activity in other stocks - not necessarily in the same industry as Cna Financial Corporation (NYSE:CNA) but similarly valued. These stocks are Kirkland Lake Gold Ltd. (NYSE:KL), Huntington Bancshares Incorporated (NASDAQ:HBAN), PerkinElmer, Inc. (NYSE:PKI), and Autohome Inc (NYSE:ATHM). This group of stocks' market valuations match CNA's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position KL,28,552273,4 HBAN,29,85788,4 PKI,21,647867,1 ATHM,15,708219,2 Average,23.25,498537,2.75 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 23.25 hedge funds with bullish positions and the average amount invested in these stocks was $499 million. That figure was $52 million in CNA's case. Huntington Bancshares Incorporated (NASDAQ:HBAN) is the most popular stock in this table. On the other hand Autohome Inc (NYSE:ATHM) is the least popular one with only 15 bullish hedge fund positions. Compared to these stocks Cna Financial Corporation (NYSE:CNA) is even less popular than ATHM. Hedge funds dodged a bullet by taking a bearish stance towards CNA. Our calculations showed that the top 10 most popular hedge fund stocks returned 41.4% in 2019 and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. These stocks gained 12.3% in 2020 through June 30th but managed to beat the market by 15.5 percentage points. Unfortunately CNA wasn't nearly as popular as these 10 stocks (hedge fund sentiment was very bearish); CNA investors were disappointed as the stock returned 5.1% during the second quarter 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 so far in 2020.
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Disclosure: None. This article was originally published at Insider Monkey.