Hedge Funds and other institutional investors have just completed filing their 13Fs with the Securities and Exchange Commission, revealing their equity portfolios as of the end of September. At Insider Monkey, we follow nearly 817 active hedge funds and notable investors and by analyzing their 13F filings, we can determine the stocks that they are collectively bullish on. One of their picks is CNO Financial Group Inc (NYSE:CNO), so let’s take a closer look at the sentiment that surrounds it in the current quarter.
Is CNO a good stock to buy now? Investors who are in the know were betting on the stock. The number of bullish hedge fund positions advanced by 1 in recent months. CNO Financial Group Inc (NYSE:CNO) was in 19 hedge funds' portfolios at the end of September. The all time high for this statistic is 23. Our calculations also showed that CNO isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video for a quick look at the top 5 stocks). There were 18 hedge funds in our database with CNO holdings at the end of June.
Video: Watch our video about the top 5 most popular hedge fund stocks.
In the financial world there are a large number of tools investors have at their disposal to grade stocks. A pair of the most under-the-radar tools are hedge fund and insider trading indicators. We have shown that, historically, those who follow the top picks of the best fund managers can outperform the broader indices by a solid amount. Insider Monkey's monthly stock picks returned 113% since March 2017 and outperformed the S&P 500 ETFs by more than 66 percentage points. Our short strategy outperformed the S&P 500 short ETFs by 20 percentage points annually (see the details here). That's why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Joe Huber - Huber Capital Management
Joe Huber of Huber Capital Management
At Insider Monkey we scour multiple sources to uncover the next great investment idea. For example, Federal Reserve has been creating trillions of dollars electronically to keep the interest rates near zero. We believe this will lead to inflation and boost real estate prices. So, we recommended this real estate stock to our monthly premium newsletter subscribers. We go through lists like the 15 best blue chip stocks to pick the best large-cap stocks to buy. 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 website. With all of this in mind let's go over the new hedge fund action regarding CNO Financial Group Inc (NYSE:CNO).
Do Hedge Funds Think CNO Is A Good Stock To Buy Now?
At Q3's end, a total of 19 of the hedge funds tracked by Insider Monkey were bullish on this stock, a change of 6% from the second quarter of 2020. By comparison, 20 hedge funds held shares or bullish call options in CNO a year ago. With hedge funds' positions undergoing their usual ebb and flow, there exists an "upper tier" of noteworthy hedge fund managers who were increasing their stakes substantially (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, Richard S. Pzena's Pzena Investment Management has the number one position in CNO Financial Group Inc (NYSE:CNO), worth close to $131.6 million, corresponding to 0.8% of its total 13F portfolio. Coming in second is Paradice Investment Management, managed by David Paradice, which holds a $86.9 million position; 6.3% of its 13F portfolio is allocated to the company. Remaining members of the smart money with similar optimism encompass Peter Rathjens, Bruce Clarke and John Campbell's Arrowstreet Capital, Cliff Asness's AQR Capital Management and Joe Huber's Huber Capital Management. 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 6.3% of its 13F portfolio. Huber Capital Management is also relatively very bullish on the stock, setting aside 4.31 percent of its 13F equity portfolio to CNO.
With a general bullishness amongst the heavyweights, some big names were leading the bulls' herd. Point72 Asset Management, managed by Steve Cohen, created the most valuable position in CNO Financial Group Inc (NYSE:CNO). Point72 Asset Management had $0.7 million invested in the company at the end of the quarter. Greg Eisner's Engineers Gate Manager also initiated a $0.3 million position during the quarter. The only other fund with a new position in the stock is Renee Yao's Neo Ivy Capital.
Let's check out hedge fund activity in other stocks similar to CNO Financial Group Inc (NYSE:CNO). These stocks are Primo Water Corporation (NYSE:PRMW), JELD-WEN Holding, Inc. (NYSE:JELD), MGE Energy, Inc. (NASDAQ:MGEE), Silk Road Medical, Inc. (NASDAQ:SILK), National Storage Affiliates Trust (NYSE:NSA), IGM Biosciences, Inc. (NASDAQ:IGMS), and Coca-Cola Consolidated Inc. (NASDAQ:COKE). This group of stocks' market valuations are similar to CNO's market valuation.
[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position PRMW,26,638608,-5 JELD,24,209757,9 MGEE,6,65660,1 SILK,20,156999,0 NSA,19,123756,6 IGMS,16,691434,0 COKE,12,31381,-1 Average,17.6,273942,1.4 [/table]
As you can see these stocks had an average of 17.6 hedge funds with bullish positions and the average amount invested in these stocks was $274 million. That figure was $294 million in CNO's case. Primo Water Corporation (NYSE:PRMW) is the most popular stock in this table. On the other hand MGE Energy, Inc. (NASDAQ:MGEE) is the least popular one with only 6 bullish hedge fund positions. CNO Financial Group Inc (NYSE:CNO) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for CNO is 63.3. 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 20 most popular stocks among hedge funds returned 41.3% in 2019 and outperformed the S&P 500 ETF (SPY) by 10 percentage points. These stocks gained 30.7% in 2020 through December 14th and still beat the market by 15.8 percentage points. Hedge funds were also right about betting on CNO as the stock returned 41.2% since the end of Q3 (through 12/14) 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.
