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Was The Smart Money Right About Cigna Corporation (CI)?

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·6 min read
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In this article you are going to find out whether hedge funds think Cigna Corporation (NYSE:CI) is a good investment right now. We like to check what the smart money thinks first before doing extensive research on a given stock. Although there have been several high profile failed hedge fund picks, the consensus picks among hedge fund investors have historically outperformed the market after adjusting for known risk attributes. It's not surprising given that hedge funds have access to better information and more resources to predict the winners in the stock market.

Is Cigna Corporation (NYSE:CI) worth your attention right now? The best stock pickers were turning less bullish. The number of long hedge fund bets fell by 5 recently. Cigna Corporation (NYSE:CI) was in 57 hedge funds' portfolios at the end of December. The all time high for this statistic is 76. Our calculations also showed that CI isn't among the 30 most popular stocks among hedge funds (click for Q4 rankings). There were 62 hedge funds in our database with CI positions at the end of the third 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 S&P 500 ETFs by more than 124 percentage points since March 2017 (see the details here). We have been able to outperform the passive index funds by tracking the moves of corporate insiders and hedge funds, and we believe small investors can benefit a lot from reading hedge fund investor letters and 13F filings.

10 best stocks according to billionaire Larry Robbins
10 best stocks according to billionaire Larry Robbins

Larry Robbins of Glenview Capital

At Insider Monkey we leave no stone unturned when looking for the next great investment idea. For example, lithium mining is one of the fastest growing industries right now, so we are checking out stock pitches like this emerging lithium stock. We go through lists like the 10 best hydrogen fuel cell stocks to pick the next Tesla that will deliver a 10x return. Even though we recommend positions in only a tiny fraction of the companies we analyze, we check out as many stocks as we can. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. You can subscribe to our free daily newsletter on our homepage. With all of this in mind let's check out the new hedge fund action surrounding Cigna Corporation (NYSE:CI).

Do Hedge Funds Think CI Is A Good Stock To Buy Now?

At the end of December, a total of 57 of the hedge funds tracked by Insider Monkey were long this stock, a change of -8% from the third quarter of 2020. Below, you can check out the change in hedge fund sentiment towards CI over the last 22 quarters. So, let's find out which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CI A Good Stock To Buy?
Is CI A Good Stock To Buy?

According to Insider Monkey's hedge fund database, Viking Global, managed by Andreas Halvorsen, holds the most valuable position in Cigna Corporation (NYSE:CI). Viking Global has a $406.8 million position in the stock, comprising 1.1% of its 13F portfolio. Sitting at the No. 2 spot is Larry Robbins of Glenview Capital, with a $261.3 million position; 6% of its 13F portfolio is allocated to the stock. Remaining professional money managers with similar optimism include Martin Taylor's Crake Asset Management, Israel Englander's Millennium Management and Ricky Sandler's Eminence Capital. In terms of the portfolio weights assigned to each position Solel Partners allocated the biggest weight to Cigna Corporation (NYSE:CI), around 13.27% of its 13F portfolio. Crake Asset Management is also relatively very bullish on the stock, earmarking 9.16 percent of its 13F equity portfolio to CI.

Judging by the fact that Cigna Corporation (NYSE:CI) has witnessed falling interest from the entirety of the hedge funds we track, we can see that there is a sect of fund managers that elected to cut their full holdings heading into Q1. Intriguingly, Farallon Capital said goodbye to the biggest investment of all the hedgies followed by Insider Monkey, valued at about $85.1 million in stock. Renaissance Technologies, also dropped its stock, about $80.3 million worth. These transactions are important to note, as aggregate hedge fund interest was cut by 5 funds heading into Q1.

Let's go over hedge fund activity in other stocks - not necessarily in the same industry as Cigna Corporation (NYSE:CI) but similarly valued. We will take a look at Snap Inc. (NYSE:SNAP), Baidu, Inc. (NASDAQ:BIDU), Prologis Inc (NYSE:PLD), Colgate-Palmolive Company (NYSE:CL), Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR), Gilead Sciences, Inc. (NASDAQ:GILD), and Becton, Dickinson and Company (NYSE:BDX). All of these stocks' market caps resemble CI's market cap.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position SNAP,63,4610841,12 BIDU,51,4634061,8 PLD,36,655443,3 CL,46,1515874,-1 PBR,24,1335976,-7 GILD,72,2021867,11 BDX,65,3961016,3 Average,51,2676440,4.1 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 51 hedge funds with bullish positions and the average amount invested in these stocks was $2676 million. That figure was $2578 million in CI's case. Gilead Sciences, Inc. (NASDAQ:GILD) is the most popular stock in this table. On the other hand Petroleo Brasileiro S.A. - Petrobras (NYSE:PBR) is the least popular one with only 24 bullish hedge fund positions. Cigna Corporation (NYSE:CI) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CI is 56.9. Stocks with higher number of hedge fund positions relative to other stocks as well as relative to their historical range receive a higher sentiment score. Our calculations showed that top 10 most popular stocks among hedge funds returned 90.7% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 35 percentage points. These stocks gained 13.6% in 2021 through April 30th and still beat the market by 1.6 percentage points. Hedge funds were also right about betting on CI as the stock returned 19.6% since the end of Q4 (through 4/30) and outperformed the market. Hedge funds were rewarded for their relative bullishness.

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

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