Our extensive research has shown that imitating the smart money can generate significant returns for retail investors, which is why we track nearly 900 active prominent money managers and analyze their quarterly 13F filings. The stocks that are heavily bought by hedge funds historically outperformed the market, though there is no shortage of high profile failures like hedge funds’ 2018 losses in Facebook and Apple. Let’s take a closer look at what the funds we track think about Teladoc Health, Inc (NYSE:TDOC) in this article.
Is Teladoc Health, Inc (NYSE:TDOC) the right investment to pursue these days? Prominent investors were getting less optimistic. The number of long hedge fund bets were trimmed by 8 lately. Teladoc Health, Inc (NYSE:TDOC) was in 42 hedge funds’ portfolios at the end of March. The all time high for this statistic is 50. Our calculations also showed that TDOC isn’t among the 30 most popular stocks among hedge funds (click for Q1 rankings).
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 206.8% since March 2017 and outperformed the S&P 500 ETFs by more than 115 percentage points (see the details here). That’s why we believe hedge fund sentiment is a useful indicator that investors should pay attention to.
Peter Rathjens of Arrowstreet Capital
At Insider Monkey we leave no stone unturned when looking for 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, which is why we are checking out this inflation play. We go through lists like 10 best gold stocks to buy to identify promising stocks. 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 we’re going to check out the new hedge fund action regarding Teladoc Health, Inc (NYSE:TDOC).
Do Hedge Funds Think TDOC Is A Good Stock To Buy Now?
At the end of the first quarter, a total of 42 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of -16% from the previous quarter. The graph below displays the number of hedge funds with bullish position in TDOC over the last 23 quarters. With hedge funds’ positions undergoing their usual ebb and flow, there exists a few noteworthy hedge fund managers who were boosting their stakes considerably (or already accumulated large positions).
According to publicly available hedge fund and institutional investor holdings data compiled by Insider Monkey, ARK Investment Management, managed by Catherine D. Wood, holds the number one position in Teladoc Health, Inc (NYSE:TDOC). ARK Investment Management has a $2.6216 billion position in the stock, comprising 5.2% of its 13F portfolio. The second largest stake is held by Citadel Investment Group, led by Ken Griffin, holding a $166.2 million call position; less than 0.1%% of its 13F portfolio is allocated to the stock. Other members of the smart money with similar optimism consist of Nancy Zevenbergen’s Zevenbergen Capital Investments, Ken Griffin’s Citadel Investment Group and Jay Chen’s Himension Capital. In terms of the portfolio weights assigned to each position Himension Capital allocated the biggest weight to Teladoc Health, Inc (NYSE:TDOC), around 16.7% of its 13F portfolio. Cota Capital is also relatively very bullish on the stock, earmarking 6.48 percent of its 13F equity portfolio to TDOC.
Judging by the fact that Teladoc Health, Inc (NYSE:TDOC) has witnessed bearish sentiment from the aggregate hedge fund industry, it’s safe to say that there were a few funds that elected to cut their positions entirely by the end of the first quarter. Intriguingly, Peter Rathjens, Bruce Clarke and John Campbell’s Arrowstreet Capital dumped the biggest position of the “upper crust” of funds monitored by Insider Monkey, valued at about $349.3 million in stock, and Sander Gerber’s Hudson Bay Capital Management was right behind this move, as the fund said goodbye to about $127.5 million worth. These bearish behaviors are intriguing to say the least, as total hedge fund interest dropped by 8 funds by the end of the first quarter.
Let’s now take a look at hedge fund activity in other stocks similar to Teladoc Health, Inc (NYSE:TDOC). We will take a look at The Kroger Co. (NYSE:KR), American Water Works Company, Inc. (NYSE:AWK), Ameriprise Financial, Inc. (NYSE:AMP), Tyson Foods, Inc. (NYSE:TSN), RingCentral Inc (NYSE:RNG), Mettler-Toledo International Inc. (NYSE:MTD), and Ferguson plc (NYSE:FERG). This group of stocks’ market caps are similar to TDOC’s market cap.
| Ticker | No of HFs with positions | Total Value of HF Positions (x1000) | Change in HF Position |
|---|---|---|---|
| KR | 35 | 3155231 | -1 |
| AWK | 30 | 1109517 | -6 |
| AMP | 37 | 969834 | 3 |
| TSN | 28 | 761852 | -10 |
| RNG | 51 | 3249906 | -12 |
| MTD | 27 | 1040369 | -2 |
| FERG | 5 | 1642726 | 5 |
| Average | 30.4 | 1704205 | -3.3 |
View table here if you experience formatting issues.
As you can see these stocks had an average of 30.4 hedge funds with bullish positions and the average amount invested in these stocks was $1704 million. That figure was $3372 million in TDOC’s case. RingCentral Inc (NYSE:RNG) is the most popular stock in this table. On the other hand Ferguson plc (NYSE:FERG) is the least popular one with only 5 bullish hedge fund positions. Teladoc Health, Inc (NYSE:TDOC) is not the most popular stock in this group but hedge fund interest is still above average. Our overall hedge fund sentiment score for TDOC is 62.4. 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. This is a slightly positive signal but we’d rather spend our time researching stocks that hedge funds are piling on. Our calculations showed that top 5 most popular stocks among hedge funds returned 95.8% in 2019 and 2020, and outperformed the S&P 500 ETF (SPY) by 40 percentage points. These stocks gained 17.4% in 2021 through June 18th and beat the market again by 6.1 percentage points. Unfortunately TDOC wasn’t nearly as popular as these 5 stocks and hedge funds that were betting on TDOC were disappointed as the stock returned -14% since the end of March (through 6/18) and underperformed the market. If you are interested in investing in large cap stocks with huge upside potential, you should check out the top 5 most popular stocks among hedge funds as many of these stocks already outperformed the market since 2019.
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Disclosure: None. This article was originally published at Insider Monkey.
