Hedge funds are not perfect. They have their bad picks just like everyone else. Facebook, a stock hedge funds have loved dearly, lost nearly 40% of its value at one point in 2018. Although hedge funds are not perfect, their consensus picks do deliver solid returns, however. Our data show the top 20 S&P 500 stocks among hedge funds beat the S&P 500 Index by more than 6 percentage points so far in 2019. Because hedge funds have a lot of resources and their consensus picks do well, we pay attention to what they think. In this article, we analyze what the elite funds think of CNO Financial Group Inc (NYSE:CNO).
CNO Financial Group Inc (NYSE:CNO) has seen an increase in support from the world's most elite money managers lately. Our calculations also showed that CNO isn't among the 30 most popular stocks among hedge funds.
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 40 percentage points since May 2014 through May 30, 2019 (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 go over the new hedge fund action regarding CNO Financial Group Inc (NYSE:CNO).
Hedge fund activity in CNO Financial Group Inc (NYSE:CNO)
At Q1's end, a total of 13 of the hedge funds tracked by Insider Monkey were long this stock, a change of 18% from the fourth quarter of 2018. By comparison, 14 hedge funds held shares or bullish call options in CNO a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.
More specifically, Pzena Investment Management was the largest shareholder of CNO Financial Group Inc (NYSE:CNO), with a stake worth $38.9 million reported as of the end of March. Trailing Pzena Investment Management was Citadel Investment Group, which amassed a stake valued at $22.3 million. Millennium Management, Huber Capital Management, and Renaissance Technologies were also very fond of the stock, giving the stock large weights in their portfolios.
As industrywide interest jumped, key money managers were breaking ground themselves. Pzena Investment Management, managed by Richard S. Pzena, assembled the most outsized position in CNO Financial Group Inc (NYSE:CNO). Pzena Investment Management had $38.9 million invested in the company at the end of the quarter. Dmitry Balyasny's Balyasny Asset Management also initiated a $4.8 million position during the quarter. The other funds with brand new CNO positions are Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital and Michael Platt and William Reeves's BlueCrest Capital Mgmt..
Let's now review hedge fund activity in other stocks similar to CNO Financial Group Inc (NYSE:CNO). We will take a look at Agree Realty Corporation (NYSE:ADC), Altair Engineering Inc. (NASDAQ:ALTR), Retail Properties of America Inc (NYSE:RPAI), and Hillenbrand, Inc. (NYSE:HI). 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 ADC,8,36435,-3 ALTR,18,70923,4 RPAI,16,206200,1 HI,20,49575,2 Average,15.5,90783,1 [/table]
View table here if you experience formatting issues.
As you can see these stocks had an average of 15.5 hedge funds with bullish positions and the average amount invested in these stocks was $91 million. That figure was $159 million in CNO's case. Hillenbrand, Inc. (NYSE:HI) is the most popular stock in this table. On the other hand Agree Realty Corporation (NYSE:ADC) is the least popular one with only 8 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. Our calculations showed that top 20 most popular stocks among hedge funds returned 6.2% in Q2 through June 19th and outperformed the S&P 500 ETF (SPY) by nearly 3 percentage points. Unfortunately CNO wasn't nearly as popular as these 20 stocks (hedge fund sentiment was quite bearish); CNO investors were disappointed as the stock returned 2.2% during the same time period and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 20 most popular stocks among hedge funds as 13 of these stocks already outperformed the market so far in Q2.
Disclosure: None. This article was originally published at Insider Monkey.